Foreclosure laws in the United States vary from state to state, but there are common terms and procedures that can help you navigate the laws in your area. Facing foreclosure can be a daunting and upsetting prospect, but the laws in your state are there to protect your interests as well as the interests of your lender. A clear understanding of the laws, as well as communication with your lender, can help you avoid foreclosure or buy you some time if you default on your loan.
Judicial vs. Non-Judicial Foreclosure
Your lender can start the foreclosure process at any time after a default on your loan, which is why it is especially important to communicate with your lender if it looks like you might miss a mortgage payment. The first type of foreclosure is judicial, which is available in all states but Idaho (Washington DC does not typically allow judicial foreclosure either). Many states require lenders to go through the court to sell your mortgaged property in order to satisfy your loan. All parties must be properly notified before a short trial, during which you will be able to plead your case.
Non-judicial or power of sale foreclosure, does not require the supervision of the court. This is usually a quicker process and proceeds of the sale go first to the mortgage lender, then to other lenders, and any excess would go to you. Non-judicial foreclosure is available in most states, but check with your attorney general's office to get more information on your state.
Strict mortgage is available only in New Hampshire and Vermont. It requires you to pay your mortgage within a specified period. Your title will automatically go to your lender, with no obligation to sell the property, if you cannot comply.
Common Foreclosure Laws
Your mortgage, or deed of trust in some states, is what will hold you legally responsible and establish the terms under which you must pay back your loan to your lender. Your state will have laws, however, outside of your contract. Here are common laws to look for in your state:
- Right of Redemption - Some states give you the right, as a borrower, to reclaim your property, even if your lender has already sold it. You must come up with the outstanding amount owed plus fees within the amount of time set forth by your state.
- Deficiency Judgements - Your lender may sue you for the difference if the sale of your home does not cover the outstanding balance on your mortgage. Not all states allow this suit, though.
You can visit your attorney general's office, as well as check the internet if you are interested in the specific laws for your state. It is always a good idea to check, as laws do vary significantly from state to state and can potentially hurt your ability to keep your home.