The foreclosure is a process by which the lender realizes unpaid dues from the borrower. When a loan is taken to purchase a house the latter is kept mortgaged as security to the lender until the loan is repaid. The borrowers make monthly payments to the lender that includes the rate of interest and partial repayment of the principal. When the borrower lags behind and fails to make the payments then the lender, before actually foreclosing sends a foreclosure notice or NOD (notice of default). Technically it is known as Notice of Assessment Lien Foreclosure Sale.
The foreclosure notice addresses the borrower and states that the person is warned that since payments are due steps will be taken to realize it as per provisions of the laws of the state.
Till the date of issuing of the foreclosure notice, a lien exists on the mortgaged property for unpaid assessments as well as charges incurred from a certain date till the date of the foreclosure notice. Till then no legal action has been taken to collect dues. With the start of these proceedings all previous action, if there had been any, is dismissed.
In the foreclosure notice the lien holder claims that the lender has so far observed all the steps required but is now taking action to speed up realization of past dues. The amount due till then is stated. The names of all the parties are listed.
The lien holders or lender will now foreclose on the property that has been described in the foreclosure notice. The debt has to be paid. In addition all extra assessments till the date of the sale together with legal fees and other costs will have to be paid.
The foreclosure notice also refers to the redemption period – this being dependent on the laws of the particular state in which the property is situated. During the redemption period the borrower is permitted to clear the pending dues and escape foreclosure. Generally the redemption period is six months. It is sometimes reduced to five weeks.
The foreclosure process is as old as the time when man started to lend and borrow. But what is new is the staggering number and that most of them are from the sub-prime mortgages that had been contracted during the last couple of years. These were peddled to the underprivileged section of American society that did not understand what they were inking.
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