Foreclosure, as we all know, is the process used by Boston mortgage loan lenders to take possession of a mortgaged piece of property due to the lack of mortgage payments. The situation that prompts it is referred to as default.
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Foreclosure in the Past
Before the early 20th century, properties were mostly purchased from other people and the law protected only the original owner of the property. So, if a payment was missed, the original owner had the right to immediately evict the buyer of the property.
The scenario is very different today, while laws still exist to protect the owner (mortgage lender), the laws also protect the home buyer to a certain extent.
Foreclosure Time Table
- After Default of Payment: Foreclosure procedures start when the original buyer of the mortgage loan stops the required monthly payments. Once the buyer defaults on the payment, the mortgage loan lender has the legal right to start the foreclosure procedure. However, before doing so, the lender must send a “Notice of Default” directly to the buyer of the loan. While the time period between the initial default of payment and the mailing of the “Notice of Default” vary according to lender, the notice is usually sent after a period of 90 to 180 days (a minimum of 90 days is required by law). Once the buyer receives the “Notice of Default”, he or she has the right to repay back the owed amount to the lender (this will stop the foreclosure procedure).
- Redemption Period: After the notice is served, lenders usually provide buyers a period of redemption i.e. time to raise money from any source to repay back the amount owed.
If even after the redemption period the amount owed is not paid back, then the lender has two options:
- Re-work The Agreement: Some lenders try to sit with the buyer of the loan to rework the loan agreement i.e. refinance to increase the term period (thereby lowering the monthly payments).
- Send Notice of Sale: If the lender decides to sell the property to recoup the amount owed, before selling the property, the lender must mail a “Notice of Sale”. Once this notice is sent, a time period of 15-30 days is provided to the buyer to clear the house, after this period the house is usually sold.
- Judicial Process: In states which have laws indicating a judicial process must be used while carrying out a foreclosure order, the lender must wait until a green light is received from the local court system, before sending out the “Notice of Sale”. If no such laws are present in the state, then the lender has the right to send the “Notice of Sale” at any time after the period of redemption.
In most cases, the lender tries to work out some solution. Foreclosure procedure is only used as a last case scenario by lenders.
Lender Tip: If you are looking for a refinance to stop a foreclosure procedure, contact us for help.