How Foreclosure Works
Foreclosure can happen due to unforeseen financial circumstances. If you stop making mortgage payments, you can lose your home to foreclosure. Foreclosure allows the owner of your home loan to sell your home to satisfy your debt. Financing a home loan involves a promissory note and a mortgage. A promissory note is your agreement to repay the amount that you borrowed and it is transferrable. When a loan is transferred, the promissory note is signed over to the new owner of the loan. A mortgage pledges a piece of real property as security for the debt created by a promissory note. The mortgage creates a lien on the property.
Participants in a foreclosure are:
- The borrower
- The lender
- The investor – an investor buys loans from lenders
- The servicer. The servicer manages the loan for the lender or investor. Loan servicers collect and process loan payments and pursue foreclosure when a borrower stops making payments.
If you fall behind in payments, the lender or investor can force the sale of your property so that it’s debt can be repaid. Judicial foreclosure requires the lender to go through the court system to regain ownership. The foreclosing party must typically mail you a notice telling you that foreclosure will begin if you do not become current on payment. You can consult with a Housing and Urban Development-approved housing counselor to assist you in finding ways to become current on payments or to modify your loan.
The foreclosing party starts the foreclosure by filing a lawsuit in Supreme Court. You will receive a complaint with time to respond. If you do not answer the complaint, the court will grant a judgment for the plaintiff and set a sale date so it is very important to answer. An attorney can prepare an answer for you setting forth any defenses to the foreclosure that you may have.
You own your home up until the foreclosure sale. If you do not leave the home after the sale, the new owner of the home will take steps to evict you. The new owner must file a lawsuit to evict you. The new owner must send you a notice prior to the eviction giving you an opportunity to vacate the property. In many foreclosure sales, the property does not sell for enough to cover the debt. The difference between the sale price and the amount owed is a deficiency. The lender can attempt to collect the deficiency from the former homeowner.
If you require assistance with a foreclosure, consult with an experienced real estate attorney.
WCM&P is an experienced Brooklyn law firm that handles all real estate matters. If you are facing a legal matter and need an effective attorney, contact our firm for a consultation.