How do you handle a foreclosure?

Answer 1

Foreclosure is a legal process in which a lender like a bank or mortgage company attempts to take over the debtor's property to satisfy an unpaid debt if the property has been kept as a collateral security for securing the debt. The lender may claim ownership of the property or sell the property to pay off the pending debt.

There are two ways in which a foreclosure can happen. In the case of a Strict foreclosure the judge sets a specific period called "law days" after which the property owner looses all rights over the property. The number of law days can vary from three weeks to nine months. This period can be used by the property owner for clearing the debt so that the foreclosure can be avoided. If the owner fails to clear the debt, then the next person who is listed as a defendant gets the chance to redeem the debt and take ownership of the property. If none of the defendants clears the debt by the law days set for them, then the bank or company foreclosing is entitled to the property.

In case of a foreclosure by sale, the judge sets a sale date. On that date, a "committee for sale" appointed by the court can auction off the property to the highest bidder. This committee is given all the powers to carry out such an auction by the court of law. The auction money is first used to cover auction expenses. From the remaining amount the lender or lenders are paid off and if anything is still left, it goes to the property owner.

The foreclosure steps broadly involve receiving the summons which is issued by the plaintiff - which could be a bank or mortgage company - to the defendant - property owner/ borrower. Within two days of the Return Date mentioned in the summons, the defendant has to file an Appearance. Then within fifteen days of the return date, the defendant has to file an answer. This answer has to be sent to all the parties concerned in the case. A signed certificate of service has to be attached. If a foreclosure by sale is desired, a motion for foreclosure by sale has to be filed. And before twenty five days of the return date, the defendant can apply to the court for protection foreclosure. The defendant in such a case has to satisfy the eligibility criteria for protection from foreclosure like being unemployed or underemployed.

Subprime foreclosure is similar to any other foreclosure. It is a foreclosure against subprime lending which involves lending at an increased credit risk. This means subprime lending is given to borrowers who are high risk that is who have a high likelihood of not paying their loans. Typically, borrowers are given enough time - longer than the agreed period - to pay off debts. Only when the period exceeds several months do the lenders decide to foreclose. This is because foreclosure is a long drawn process in general and banks and other creditors try to avoid it as much as possible.

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