A Homeowner's Rights During Foreclosure
Foreclosure can be an emotionally and financially difficult time in the life of a homeowner and it can affect not only the homeowner but also the homeowner’s spouse and children who live in the home being foreclosed. Therefore, it is important to be aware of your rights as a homeowner during every stage of the foreclosure procedure.
State laws vary about the time frame and procedures required for a foreclosure. However, most foreclosures follow a common trend. After a homeowner fails to make his or her monthly mortgage payments for a period of time (typically 90 days or more) the lender may decide to start foreclosure proceedings in order to take complete ownership of the property which serves as collateral on the mortgage.
If the lender decides to pursue a foreclosure then the lender must provide the homeowner with written notice of that intention. The homeowner has the right to pay back all past due amounts along with the late fees and other penalties agreed to in the mortgage contract. If the homeowner does pay all outstanding fees and past due amounts then the foreclosure process will be stopped.
In reality, it is not always possible for the homeowner to come up with all of the money that is owed to the lender at the time of the foreclosure notice. The homeowner has the right to discuss payment options with the lender and to try to work out an agreement whereby the terms of the loan are renegotiated so that the homeowner keeps the property.
The homeowner may also discuss the possibility of a private sale with the lender. Sometimes a private sale can yield a higher selling price than a foreclosure and it can pay off the existing mortgage debts while leaving the homeowner with a profit. It is important to note that the right to redemption would not attach to a private sale.
The homeowner may remain in the home during the foreclosure process. However, with that right come the responsibilities to adequately maintain the home and pay the real estate taxes and homeowners insurance. Those responsibilities attach whether or not the homeowner decides to remain in the home during foreclosure.
If an agreement cannot be worked out prior to foreclosure, then the homeowner has the right of redemption in some states. This statutory right allows the homeowner to regain ownership of the house by buying it back after the property has been foreclosed. Approximately half of the states have this right. The redemption laws allow the homeowner to regain ownership of the home paying the foreclosure sale price and a statutory interest rate to the lender. Usually, this right must be exercised within 6-12 months of the foreclosure sale.
Throughout the foreclosure process the homeowner has the right to be treated fairly. Any money that is earned on the sale in excess of the amount owed on the mortgage, late fees, penalties and foreclosure costs should go to the homeowner.
Sometimes, foreclosure is inevitable. However, the unpleasantness of the experience can be minimized if the homeowner is aware of his or her rights.
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