“For Sale – Bank Owned.” This type of For Sale sign has become an all too common site, particularly in Las Vegas, Nevada, which has had one of the nation’s highest home foreclosure rates in the country for the past four years. Finding a solution to this crisis has been the subject of many news headlines and became one of the main focuses of the 2008 presidential election. This article will discuss the foreclosure procedures used in the United States, the different legal options that a homeowner may have when faced with foreclosure as well as the changes to real estate law that have taken place over the past two decades in order to alleviate some of the difficulties caused by home foreclosure.
Types of Foreclosure
Foreclosure by judicial sale is available in every state and is required by many states. When using this type of foreclosure, the lender must go through the court system to initiate the foreclosure proceedings. Once a borrower has defaulted on the mortgage obligation, the lender will typically send a notice of intent to foreclose, giving the borrower a specific amount of time in which to bring the loan current. If the loan remains in default, the lender can then file a lawsuit in court and serve the borrower with a summons and complaint. The borrower then has the right to respond to the complaint and can also raise any defenses to the foreclosure that they may have. If the borrower fails to respond or raise any defenses to the foreclosure, the Court will issue a judgment and the lender can proceed with the foreclosure sale. At the foreclosure sale, the property will be placed for auction and the public will be allowed to bid on it. If the property is not sold, ownership will go to the lender who can then initiate eviction proceedings to remove the borrowers from the property if it is still occupied.
The other widely used method of foreclosure is foreclosure by power of sale, which is allowed in 29 states This method may also be called a non-judicial foreclosure and it allows the lender to foreclose upon the real property without the necessity of going through the Court. Generally, in states that utilize this method of foreclosure, a borrower will sign a deed of trust and a promissory note when finalizing the loan. A deed of trust “conveys the property from the mortgage holder to the trustee, who holds the property in trust for the mortgage holder.”
