When a homeowner falls into difficult financial circumstances they may attempt to keep up with their bills. They trim expenses, limit discretionary spending and look for ways to save money. As the months go by, however, they find that some of the bills are not being paid. In the worst of these circumstances it is the consumer’s home that is eventually placed into jeopardy through non-payment of the monthly mortgage bill. As the homeowner goes from a few missed payments to being closer to default, the lender may begin foreclosure procedures.
The lender uses foreclosure procedures only when all other attempts to salvage the mortgage have not succeeded. Foreclosure is a lengthy and expensive process for both the lender and the buyer and it is a situation that both are generally anxious to avoid. Most states are judicial foreclosure states wherein the process of foreclosure is one that is governed by the court system. Other states utilize a non judicial foreclosure system that does not involve the courts. This is generally a quicker process than that which occurs in judicial foreclosure states.
Judicial foreclosure states do have some advantages for the homeowner, however. Because the process requires a longer period of time than a non judicial foreclosure the homeowner just may have time to come up with an alternative solution that does not end with them losing their home. Foreclosure is nearly always a traumatic process that harms everyone residing in the foreclosed residence. It is far preferable for everyone involved to take any necessary steps to prevent such a troublesome occurrence.
The homeowner in judicial foreclosure states will typically have an opportunity to work with their lender’s loss mitigation department. This loss mitigation department is generally empowered to negotiate a more advantageous mortgage plan for the homeowner. This may involve a refinancing of the mortgage or forgiveness of some late payments that are then tacked on to the end of the mortgage period. If the homeowner can meet the terms of the new mortgage, then the foreclosure process need not continue.
If, however, the homeowner can still not meet the terms of the mortgage, then foreclosure proceedings will resume. The lender will file a complaint in the state court system and begin to build a case proving that the homeowner is in default of their loan. It may be months before the case is heard in court and the homeowner will have adequate time to secure legal counsel and mount an appropriate defense. The arguments of both the homeowner and the lender will be given a fair hearing in court.
At the conclusion of the court proceedings the judge will issue a decision in favor of one of the parties. In cases where the judge finds in favor of the lender the property is set up to be sold at a sheriff’s sale. This sheriff’s sale is an auction in which the property in question is sold to the highest bidder. The proceeds of the auction go to the lender to compensate them for their loss on the previous mortgage. Once the highest bidder pays for the property and records the deed they are the official owners of the property and may do with it as they wish.
Judicial foreclosure states provide a protracted foreclosure process that is difficult, but nonetheless provides each party in the dispute adequate time to prepare. Resolving such cases can easily require one to two years, during which time the homeowner may look for alternative ways to ameliorate their circumstances. While in the process of any foreclosure the homeowner should seek adequate legal counsel.