Trying to navigate the foreclosure process can feel like a daunting task to many homeowners. Many choose to simply toss the late notices in the garbage, hoping that they can make up the difference before the clock runs out. Unfortunately, this approach proves incredibly stressful and does not help Franklin TN homeowners get out of the situation unscathed. Instead, it is important for homeowners to learn all they can about the foreclosure process to navigate the steps with confidence. They can get started by using this guide to explore foreclosures in detail.
Different Types of Foreclosure Exist
Within the boundaries of the United States, foreclosures tend to occur in one of two ways: judicial and nonjudicial. The judicial foreclosure process begins with the lender filing a civil lawsuit in the local court system. Homeowners will then receive an official summons from the court detailing the lender's complaint. The foreclosure request moves through the court system, resulting in authorization from the judge to proceed with the next steps.
In nonjudicial foreclosures, however, lenders do not have to go through the court system to receive permission to reclaim and sell the property. They simply have to file a Notice of Default that notifies the homeowner of the impending foreclosure and gives them a chance to bring their account current. After the specified amount of time passes without payment, the lender can file a Notice of Trustee's Sale and move forward in reclaiming and selling the property.
Homeowners Have Many Opportunities to Submit Their Payment
Homeowners receive many opportunities to satisfy their late payments and make their mortgage account current once again. These opportunities begin with the initial late payment notices from the lender. Without any attempts to satisfy the outstanding balance, lenders will head to the local courthouse to file a civil lawsuit or submit a Notice of Default. Even at this point, homeowners can pay the amount they owe to stop the foreclosure proceedings.
For judicial foreclosures, homeowners can make their payment any time throughout the proceedings to stop the process. In nonjudicial foreclosures, the ability to make a payment and halt the process ends on the date specified in the Notice of Default. Homeowners must take action before it is too late or they will watch their property go into foreclosure without any recourse.
Public Sale Occurs at Auction to the Highest Bidder
The filing and notification process for judicial and nonjudicial foreclosures tends to go on for eight to twelve months on average. At the conclusion of that step, lenders can move onto selling the home. Lenders across the United States sell these foreclosures at auction to the highest bidder.
These bidders can only drive past the property before purchasing, keeping the actual condition and value of the home hidden. This makes many foreclosed homes go for far less than their actual value, which often leaves an immense amount of money on the table.
Homeowners May Need to Pay the Remaining Balance
When the foreclosed homes go for very little at auction, there is a chance that the sales price will not fully cover what homeowners still owe on the property. Lenders can then file a lawsuit that gives them the right to collect any balance above the final sales price on the foreclosed home.
If their lenders are awarded the judgement, homeowners must arrange to pay off the remaining mortgage balance even though they do not own the home. Certain states, such as North Carolina, do not allow lenders to file for this judgement and collect the remaining balance owed by the homeowners.
Foreclosure Can Damage Credit Scores
At the end of the foreclosure process, homeowners can expect to see a big hit to their credit scores. People with a credit score near 700 can expect to lose around 150 points in short order. While the foreclosure will stay on the credit report for seven years, homeowners can expect their credit scores to gradually improve with time. As long as they are using their credit accounts appropriately, and paying off the balances every month, homeowners can rebuild their credit fairly quickly after going through a foreclosure.
Lenders Offer Ways to Avoid Foreclosure
As the process is long, drawn out and quite expensive to complete, lenders tend offer homeowners many different ways to avoid foreclosure. Most lenders wait until well past the 120 day mark to start the foreclosure proceedings. Prior to that time, they may try to set up a payment plan that allows homeowners to get caught up and remain current on their mortgage bills.
With a better understanding of the foreclosure process, homeowners can easily move through each phase without worry. They can even use their newfound knowledge to work with their lenders and the court system to halt the proceedings.