Statutory Redemption vs. Equitable Redemption
Statutory Redemption
After foreclosure the borrower has a period during which he/she may attempt to regain ownership of the property. In many states this right is guaranteed by legislation, and could be up to 1 year in most States, if the borrower is able to pay the amount that the property was sold for at auction then he/she will be allowed to keep the property. This period is referred to as the statutory redemption period.
In States that provide statutory redemption, the borrower may continue to live on the property during the statutory redemption period after foreclosure. If after the statutory redemption period the borrower has not redeemed the property the purchaser at the foreclosure auction gets possession and the title deed to the property.
States that provide for statutory redemption usually have higher foreclosure sale prices, which benefits both the borrower and creditors whom have an interest in the property. In States without this protection such as Texas for example all foreclosure sales are final.
In the Sates with such statutes, where mortgagors(borrowers) may redeem property after a mortgage foreclosure, the states have allowed statutory redemption in order to drive up foreclosure sale prices; this benefits both the defaulting mortgagor and his creditors who have obtained an interest in the property. The mortgagor is given an opportunity to match the sale price. This often has the effect of causing potential buyers of the foreclosed property to adjust their bids.
In a State without such a statute, such as Texas, this statutory right of redemption does not exist, and this means that all foreclosure sales are final, unless the courts overturn it on procedure.
Equitable redemption
Equitable redemption is a common law concept arising out of judicial opinions. It grants the borrower the right to reclaim the property by catching up all arrears mortgage payments, at any time prior to foreclosure. The major difference between statutory redemption and equitable redemption is that statutory redemption begins at foreclosure while the right to equitable redemption ends at foreclosure. All state courts recognize and uphold a borrower’s right to equitable redemption.
If you are currently facing home foreclosure it is important that you know what the Laws in your State are and what your rights are in terms of these Laws. Consider consulting a Professional who knows the foreclosure Laws applicable in your State as well as the practices of various mortgage lenders and may be able to negotiate on your behalf and help save your family home.
For expert advice on avoiding home foreclosure contact HomeAssure.Com for a
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7 Killer Strategies To Head Off Foreclosure
Home foreclosure is a traumatic event and unfortunately today many homeowners are faced with the prospect of losing their family home. Nobody wants to be in a situation where foreclosure is inevitable; however there are strategies that you can employ to help save your home.
Strategy 1: Confront the Problem
If you can’t afford your monthly mortgage payment, face up to it and recognize the problem and take the appropriate steps to deal with it. Avoiding the problem will compound the problem. Often people in a crisis wait too long before taking action – As soon as you are aware of the problem deal with it immediately.
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Judicial Foreclosure
What is a Judicial Foreclosure?
Also called foreclosure by judicial sale, Judicial Foreclosure occurs when the courts handle all the proceedings of the foreclosure and make sure that there won’t be any more problems for the purchaser of the property. It is a more lengthy process taking up to a year versus approximately 3 months for a Non-Judicial Foreclosure. Judicial Foreclosure is also more expensive than Non-Judicial Foreclosure.
Though this type of foreclosure is rather expensive and time consuming since the court will conduct investigation regarding the said foreclosure; the court will also make sure that all the persons connected to the transaction will be duly informed of the said hearing. It still has its advantages as since less problems will likely crop up especially to the new owner of the foreclosed property.
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Non-Judicial Foreclosure
Non-Judicial Foreclosure occurs without any court intervention and, this kind of foreclosure is simply between the lender and the borrower, or other persons with connections to the transaction like a mortgage broker or a financial adviser. It is preferred by lenders as it provides the mortgage lender with a greater degree of control, in many instances it would suit the borrower as well as the lender has an incentive in getting the best price for the property, thereby limiting the lender’s credit exposure.
The actual process may vary from State to State and you should find out what the exact process is in your State. Some states require a Notice of Default while others start the process with The Notice of Sale.
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Judicial vs Non-judicial Foreclosure
The foreclosure process differs from state to state, and essentially depends primarily on whether the state uses mortgages or deeds of trust as mortgage instruments to finance the purchase of real property.
A mortgage creates a lien on the title of the property while a deed of trust is a deed provided by a borrower to a trustee to secure payment and also creates a lien on the title of the property. A deed of trust can be foreclosed by a non-judicial process , it is also possible to foreclose with a judicial process. A mortgage must be foreclosed by a judicial process.
The non-judicial process is much faster 3 months versus up to a year for the judicial process. It is also cheaper than the judicial process as the courts aren’t involved in the process.
To foreclose in accordance with the judicial procedure, a lender must prove that the borrower has defaulted. After the lender has exhausted all non-legal means to resolve the situation it will instructs its attorney to pursue the matter. The attorney usually issues a letter demanding payment - if the borrower is unable to pay off the default, the attorney files a lis pendens (lawsuit pending) with the court. The lis pendens gives notice to the public that a pending action has been filed against the borrower. The purpose of the action is to provide evidence of a default and get the court’s approval to initiate foreclosure.
Non-judicial foreclosures are based on deeds of trust that contain the power of sale clause. The clause enables the trustee to initiate a mortgage foreclosure sale without having to go to court. The trustee is typically required to issue a notice of default and notify the borrower about the default status. If the borrower fails to respond , the trustee then initiates the steps for conducting the mortgage foreclosure sale of the home.
A Plan To Stop Home Foreclosure
Over recent years many Americans have used mortgage loans as an easy way out of a financial crisis, by using their homes as security. Yet, irresponsible mortgage management can lead to the foreclosure of your home, if you are not careful. Here are some tips that you may find useful in developing a plan to stop foreclosure and to protect your home from creditors.
Consult the experts
Good advice before applying for a mortgage loan is to consult experts like real estate brokers and financial advisers are well informed when it comes to the best deals by different lenders, as well as information about the mortgage itself. They can inform you of the contractual agreements and will be able to organize them for you; they can inform you of maturity dates, interest rates and also possible ways to extend the deadline to avoid foreclosure.
Consult a financial adviser who can analyze your financial situation, as well as the purpose of the loan, and will determine the amount that you may safely borrow from the lender. The real estate brokers can inform you of the best deals in town, since they have numerous contacts with different companies. With these two working hand in hand, they can easily help you out in organizing your mortgage loan and avoiding foreclosure.
Borrow Prudently
If you go through the loan without the help of real estate brokers or financial advisers, then you should be careful with the amount that you intend to borrow. It is a common fact that most properties were foreclosed due to irresponsible borrowers and reckless lending by mortgage lenders who loaned ludicrous amounts of money without adequately assessing the ability of the lender to repay the loan. Unfortunately many of these are likely to lose their family homes in coming months.
Try to avoid the temptation of going for a large loan. If you are planning to use it to refinance a business or for home improvements purposes then you better analyze your current financial status if you can pay the amount on the maturity date. Always ensure you ability to repay the loan.
Also, try to shop around for the best deals in town. The internet is a good source of information for various lenders in your area; try to look for a lender with the lowest possible interest rate since one of the factors resulting in foreclosures is an unfordable high interest rate.
Know the paperwork
There are two kinds of paperwork that can help you avoid foreclosure of your home: one is the promissory note, and the second is the deed of trust or lien.
The borrower can make a promissory note when they fail to pay the full amount on the maturity date. The note usually contains the request of the borrower from the lender to extend the maturity date of the remaining amount, the maturity date, and remaining unpaid amount and of course, the interest rate. Obviously the lender will have to agree to this. This is quite useful if you don’t want your property to be foreclosed for not paying the full amount.
A deed of trust is simply an attached document, which serves as a security interest by the borrower to the lender to be able to pay for a certain debt or a loan. Usually, a deed of trust is considered a lien rather than a stipulation stating a transfer of title of the property from the borrower to the lender. Lenders usually prefer a deed of trust as it enables them to expedite the foreclosure process from 1 year to about 3 months.
Communicate With Your Mortgage Lender
A very important tip is to always try to keep the channels communication between the lender and the borrower open. Doing so will not only improve the relationship between the two, as well as gain the trust of the lender, especially if you experience a short-term problem.
Another practical reason for opening a communication line with the lender is to receive updates regarding the mortgage and foreclosure. By doing so, you will be well informed regarding various stipulations of the mortgage and avoiding foreclosure.
It is very important for the borrower to pay attention to all the details when it comes to acquiring a mortgage; not only would you be well informed of the various facets of the contract, as well organizing your mortgage to avoid a possible foreclosure of your property. Many properties are currently being foreclosed and one of the best ways to avoid this is to be familiar with and understand the various documents relating to your mortgage loan.
What Is Home Foreclosure & How To Avoid It
Most people need to borrow money at some time in their lives, unless your name is Bill Gates or Warren Buffet. Over recent years many Americans have borrowed money by extending their mortgage. The person’s home then serves as security for that loan and unfortunately this exposes the family home to risk. Failure to meet their commitments in terms of the mortgage agreement could result in the family home being repossessed by the mortgage lender, which is foreclosure.
The Mortgage
One good definition of a mortgage is the act of using a property or a business as a security for a monetary loan. The term “lender” is often referred as an entity that provides the amount for the mortgage loan, usually a bank or a mortgage lending company. The borrower will then be subjected to the terms and conditions stipulated by the mortgage agreement such as interest rates, payment terms, and date of payment. A mortgage agreement
What Is Foreclosure?
Foreclosure occurs when the bank or the mortgage lender sells or repossesses a property used as collateral for the mortgage loan, or a deed of trust, in which the owner fails to comply with his or agreements with the bank or lender. It is always important for the borrower to know the terms and conditions of the mortgage loan such as interest rates, payment deadlines, and other agreements and conditions between the lender and the borrower to avoid the risk of foreclosing the property to the lender. If you’re in default on any of the terms in the mortgage agreement you run the risk that the lender could foreclose on the collateral (your home).
Types Of Foreclosure
One type of foreclosure is the foreclosure by judicial sale. The court following a court order will supervise the sale of the property or business used in a mortgage and all the proceedings will be properly distributed by it. This type of foreclosure will be under legal jurisdiction, and all parties will then be notified by means of a warrant.
Usually, in case of a sale, the proceedings will be distributed accordingly by the court; first to satisfy the terms and conditions of the loans, other liens or parties involved, then finally (if any surplus) to the mortgagor (home owner).
The most popular type of foreclosure is the foreclosure by power of sale. This involves the sale of the property by the mortgage holder and not under the legal jurisdiction of a court. Once the property or the business has been sold by the bank or the lender, then the proceedings will be distributed accordingly; first to the terms of the loan and then to the mortgagor. This option is more favorable to the mortgage lender as they are able to control the process and ensure that they receive a good price for the property.
The ancient form of foreclosure is called strict foreclosure. The mortgagor is informed by the court to pay the mortgage loan in a specific period of time. When the borrower fails to pay the debt by the said deadline, then the mortgage holder will then gain ownership and title of the property without any obligation to sell. This is not very popular with mortgage lenders as they are in the business of lending money not managing properties.
Avoid Foreclosure – How To Safely Obtain A Mortgage
Ensure that the loan is affordable in terms of your current and future income levels, always factor in the possibility of your income reducing in future. Most people always assume that their incomes will continue to grow in future, however that is not always the case and retrenchment and illness are just two examples of unforeseen events that can influence future income.
Shop around for the best mortgage deals, there are literally thousands of institutions operating in the mortgage lending market and it makes sense to do a bit of market research especially if you can knock a few points off your mortgage interest rate.
Use the services of professionals such as mortgage brokers and financial advisors. They specialize in mortgage loans and will be able to provide advice on avoiding foreclosure. These people specialize in various mortgage loans and know everything about foreclosure. They can give you advice on the best deals for a loan and keep tabs on various terms and conditions to avoid a possible foreclosure on your property.
To avoid the risk of foreclosure on your home, it is always best to know all about the ins and outs of mortgage and foreclosure before entering into a mortgage agreement.
