When Your Home Ownership is Threatened
Foreclosure is a legal process that follows a specific schedule and must be addressed as soon as possible for the best outcome.
A mortgage is a loan for a home in which the home itself is the collateral. When a homeowner stops making payments, foreclosure is the method the bank or mortgage holder uses to take the home, auction it and apply the money to the loan. But that’s not the entire story.
Home mortgage foreclosure is a type of lawsuit. It starts when a deputy sheriff serves papers on the homeowners and it ends with an auction. It can take many months for a foreclosure to be finalized.
The papers served on the homeowner are the summons and complaint. The homeowner has a certain number of days to respond to the complaint by filing an “answer” with the clerk of the court. The answer is a chance to dispute the foreclosure. Because there is seldom much basis for dispute, an answer is usually not helpful.
If the homeowner does not file an answer, the bank’s lawyer files papers asking the judge to issue an order allowing it to hold an auction. This is called a “motion for summary judgment and order of sale.” Usually the judge grants the motion and the order is issued.
Most people assume the bank hires an auctioneer who hangs out a red flag and draws a crowd. Not so. In most cases the bank’s lawyer does the auction in his or her office. People who see the legal notice in the newspaper come and bid. They are looking for a bargain and tend to bid low. Seldom does the auction yield enough money to pay what is due, and the result is the homeowners owe a balance: the remaining principal, interest, the bank’s legal fees and costs such as filing fees and legal notices. This is called a “deficiency,” and it can run to tens of thousands of dollars.
Many people want to know if they have to move out at the beginning of the foreclosure. In most cases the homeowners will not have to move until it is almost complete. Most people will stay on as long as possible and save as much money as they can to pay for moving.
Foreclosure is a very daunting thing for most people and often not the end of the problem. It is important to remember that mediation or bankruptcy can sometimes make a bad situation better. It is always a wise idea to consult an attorney as soon as you think the bank may be coming after your house.