Property Repossession

If you fail to make your mortgage payments, the lender may foreclose on the property. This may be a judicial foreclosure or a statutory foreclosure, depending upon the terms and agreements made within the original mortgage contract. There are detailed regulations concerning foreclosure procedures, and it is a good idea to consult with an attorney if your home is endangered by a foreclosure proceeding.

Statutory Foreclosure

A statutory foreclosure can be performed without bringing a court action, although the lender must follow strict state regulations as to the proper notices and opportunities for you to provide payment before a sale of the property occurs. This procedure is relatively fast. The lender will give you a notice of default, informing you that they intend to sell the property in a form prescribed by state statute.

If you fail to redeem the default, or use other lawful means (for example, filing for bankruptcy, which will provide a temporary automatic stay to the proceedings) to stop the sale, the lender will conduct a public auction. The highest bidder at the auction becomes the owner of the property free and clear of any interest. However, further legal action, such as an eviction, may be necessary to obtain possession of the premises.

Judicial Foreclosure

In a judicial foreclosure action, the lender must file a complaint with the court system and go through the litigation process to obtain the right to foreclose on the property. Many states allow you the right to stay in possession of your home until the foreclosure process is finalized. The property is auctioned by the county sheriff or some other officer of the court, with the sheriff issuing a deed to the winning bidder. If no other buyers step forward, then the lender receives title to the property.

Alternatives

Most lenders prefer to avoid the cost of foreclosure, and may be willing to work out an agreement with you, such as accepting 'interest only' payments or partial payments for a short time.