Foreclosure laws what you need to know

Foreclosure laws what you need to know

A foreclosure is an extremely unpleasant event if it happens to you. That being said, you’ll be able to navigate the situation more effectively if you’re aware of what to expect and what is involved.

So what exactly is a foreclosure? It happens when you are late on payments to a bank for an asset (let’s say a home for this example). The bank is then able to repossess and/or sell the property to recoup their money. When this occurs, the bank will first send the homeowner a notice of default. You then are given a period of time to make good on the debt, and may need to cover other related expenses such as interest, late penalties and legal fees. If this passes without the terms being settled, the bank can then move onto judicial foreclosure, where they seize your home and can then sell it to recoup their money. This whole process does take a while, anywhere between three to six months.

When you go into foreclosure, some of the debt goes away. Generally speaking this includes the first mortgage, but you may still be liable for a second mortgage if you have one. Additionally, if the price of your home went down, you may owe the difference between your debt and what the home is worth.

Foreclosure does seem like a frightening process, as no one wants to lose their home. This is why it’s key to purchase a house that is within your means, so you can keep up with the payments. If you do face a foreclosure situation, don’t panic, look for legal assistance, and remember that laws vary by state. 

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