If your home is being foreclosed, this page gives you information and help on the foreclosure process, tips to avoid foreclosure, and free foreclosure help

What is a housing foreclosure?

A foreclosure is a legal process where the lender obtains a court order to legally foreclose (sell) the property pledged against the mortgage.  This occurs after the owner fails to comply with the terms of the mortgage. Usually this failure is defaulting on the payments.   If the mortgage has a recourse clause and the sale of the property does not pay the existing balance of principle and fees the lender can file a claim for a deficiency judgment forceing the borrower to repay any loss the lender has from other assets .

What is the process of foreclosures?

The foreclosure process can be lengthy or rapid and varies throughout the USA. There is no exact foreclosure process but it can often be as follows. 

There are two types of foreclosure in most states. Using a "deed in lieu of foreclosure," or "strict foreclosure", the note holder claims the title and possession of the property back in full satisfaction of a debt. In the proceeding simply known as foreclosure the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure, in order to protect the debtor in the event the value of the debt being foreclosed on is substantially less than the market value of the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the immovable property in return.

Other states have adopted non-judicial foreclosure procedures in which the mortgagee, or more commonly the mortgagee's servicer's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff's auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.

How can I get Free Help for Foreclosures?

If you are having foreclosure problems you can get free help from the HUD, a government agency that specializes helping people with foreclosures.  There are also many companies that offer free consultations on the foreclosure process.  

Further Borrower Obligations After Foreclosure:

If the mortgage is over 80% of the house value, the borrower may be required to pay Private Mortgage Insurance.  Private Mortgage Insurance or PMI is insurance for the lender to help recover the money lent in the case of borrower defaults and the lender is not able to recover its costs after foreclosure (sale) of the mortgaged property.

In the case the value of the house being foreclosed is less than the outstanding mortgage and there is no insurance to cover the loss a court may enter a deficiency judgment against the borrower.  This judgment is used to obligate the borrower to repay the difference in foreclosed amounts received and the outstanding loan.  A deficiency judgment gives the mortgager the right to collect the difference from the borrowers other assets.

Often the primary mortgage on a residential house is "non recourse debt" this type of debt limits the mortgagers ability to recoup their losses on foreclosed property.  However, home equity loans and credit card loans are usually not non recourse debt so there usually is no limit on the ability of mortgage lenders ability to recoup losses and file a deficiency judgment.

There may also by tax implications on foreclosed properties.  If the mortgage is non recourse or the lender chooses not to pursue a deficiency judgment, the bank may choose to write of the unreceived loss and "forgive the amount".  In this case the borrower may have to pay taxes on the forgiven moneys.  However recent legal changes may mean that this tax no longer has to be paid in some cases.  You may wish to consult a tax adviser.

If there are other liens in the property before it is foreclosed and the proceeds of the foreclosure are not enough to pay off these liens or obligations, the borrower will be required to repay these sums.

How can I stop the a Foreclosure on my home?

Unfortunately there is no easy way to stop the foreclosure process.  The best way to stop a foreclosure is to contact your lender and try to work out a repayment plan, contact a HUD specialist (see tips on stoping a foreclosure) or contacting a company that specializes in the foreclosure process.  Click on the link below for a free consultation on your foreclosure problems.