The law states that Lenders/ Creditors may use the Judicial Process to Foreclose a defaulted mortgage.
The process commences when the creditor files a lawsuit against the debtor in the county court around which the property is located, following a notice of defaulting the mortgage. Once the “Lis Pendens” or a “Litigation pending” notice is filed, the case goes on public record. The creditor can then notify the home owner of the suit filed against them for defaulting the loan by mail or in person. Once officially recorded in court, the defaulting party is sent summons to the filed suit and are expected to respond to the notice within a stipulated period of time which is usually 20 days. If the debtor/ home owner fails to respond to the court summons, the court can find the debtor in default and proceed to a final hearing against the defaulting party. If the court ruling is against the homeowner, the final hearing will settle on the total value the homeowner owes the creditor as well as the timeline for foreclosure or short sale.
As per the Foreclosure Laws, the creditors are not expected intimate the homeowners prior to initiating the lawsuit for foreclosure. However, this is not the same for deeds of trust or individual mortgage cases. The homeowner has a right to stop or delay the foreclosure process by paying the part or full payment due to the lending party.
Foreclosure Sale or Auction Notice
Once the court has settled on a final hearing, the Foreclosure Sale date is set. This usually varies from 25 to 75 days after the hearing depending on various factors and specific State Laws. The court clerk then send the concerned parties a notice of sale with the location, date and time of sale of the property as specified by the county court. This notice is circulated once a week for a period of two weeks. The law states that the second Sale notice should be issued at least 5 days prior to the day of sale.
The county court clerk typically presides over the sale which usually takes place at the county court at 11 am on the date of sale. The winning bid or the buyer is provided with a “Certificate of Sale” by the court clerk. The buyer is expected to deposit 5% of the total value of the sale right after the sale is closed and pay the remaining due amount within 20 days. Once the due amount is received, the court clerk transfers the ownership deed to the buyer provided no objections are met with.
Once the ‘Certificate of Sale’ is issued to the buyer, the debtor typically loses any right for redemption. However, this is subject to individual case basis.
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