Foreclosures
and the laws corresponding to it are made to protect the interest of both
buyers and sellers. From the lay man’s perspective it might look cruel to take
possession of somebody’s property against their will, but these laws are
formulated to ensure that lenders do not have to bare losses due to concurrent
bad-debts from defaulters.
In USA, there
are a high number of defaulters per state and strict laws are made to counter
them. At the same time, laws are also made to protect the innocents from
companies or individuals who mislead them and make them fall into a trap of
wrongful foreclosure suits. Every state in the US has different laws
corresponding to foreclosures, though loaning companies in all states start the
process of foreclosure only three to six months after the first missed payment.
Therefore, if one has missed their monthly payments due to some difficulties,
they should always inform their lenders so that they do not take any legal
action against them. Avoiding calls from lenders only accelerates the
foreclosure process and makes it worse on one’s credit statement.
There are
generally three foreclosure processes which are followed in the USA which
include Judicial Foreclosure, Power of Sale (Non-judicial) and Strict
foreclosure though they are adapted differently in each state. In Texas for
example, only judicial and non-judicial foreclosures are practiced. There are
several law firms and housing companies in cities like Houston to help people
on the verge of having foreclosures on their properties. They can both solicit
and advice their clients on how to stop foreclosure in Houston, Texas and come to an amicable settlement with their
lenders.
Most
foreclosures, that happen in Houston, Texas are non-judicial in nature and are
governed by the 51st Chapter of the property code. Once a defaulter
does not make the payment within 60 days, they are sent a legal document (Notice
of Default & Intent to accelerate) and this is the last chance for
defaulters to avoid foreclosure.
There is no
right of redemption in averting foreclosure in Houston, though deficiency judgments are allowed. The state
of Texas usually follows two methods of foreclosure, which are given below-
1. Judicial
Foreclosure
In this
judicial process of foreclosure, the lender files a lawsuit to obtain a court
order to foreclose; it is used when no power of sale is present in the mortgage
or deed of trust. Hence, stopping
foreclosures in these cases are difficult. After the court declares a
foreclosure, the property will generally be auctioned off to the highest
bidder.
2. Non-Judicial
(Power of Sale) Foreclosure
The non-judicial
foreclosure is used when a power of sale clause exists within a mortgage or
deed of trust. A "power of sale" clause is the clause in a deed of
trust or mortgage in which the borrower pre-authorizes the sale of property to
pay off the balance on a loan in the event of their default.
A small number
of states also follow the process of ‘Strict Foreclosure’ in which the lender
files a lawsuit to the defaulting home-owner. If unable to pay within the
stipulated time, the property is directly handed over to the mortgage holder.
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