Filing for Foreclosure

Foreclosure is a process where a lender, such as a mortgage company or a bank, repossesses property to settle debt resulting from unpaid loans. With the current housing market troubles, there will be many foreclosures in the coming months.

Lenders reserve the right of foreclosure until the loan is paid off. Homeowners can file for foreclosure themselves if they are no longer able to keep making payments on their loan. If the homeowner misses a certain amount of payments but does not file, lenders will usually initiate the process within three to six months.

Foreclosure can happen in one of two ways: Strict Foreclosure or Foreclosure by Sale. Strict Foreclosure is when a judge sets a day when the lender can lawfully repossess the property. If the money raised from reselling the property does not cover the total debt, the lender is entitled to recoup it from the previous owner. Foreclosure by Sale is when a judge sets a date for sale. In this scenario, the home is usually put up for auction.

The owner can prevent foreclosure by repaying what they owe before the set date. If this is not possible, they should look into the possibility of easing the debt through refinancing or filing for bankruptcy. Foreclosure should only be used as a last resort. If an owner believes the lender is forcing the foreclosure on them unnecessarily, they can challenge the debt's validity in court. The burden of proof lies with the lender to prove the debt is valid. The owner can also file a lawsuit if they believe the lender is violating the terms of the Truth in Lending Act.