Define Bank Foreclosure
When a homeowner defaults on his mortgage, the lender has the right to legally foreclose on a home. The legal definition of a foreclosure can be complex. Essentially, a foreclosure is a repossession of a property by the lender because of non-payment where ownership rights transfer from the homeowner to the bank.
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Pre-Foreclosure
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From the date of the first missed payment, a property is consider in pre-foreclosure. The property will remain in pre-foreclosure until the foreclosure auction has been completed. However, in states such as California and Florida, a homeowner is offered a right of redemption for the property, meaning they can reinstate the loan even after the property has been repossessed by the lender. This can be done only if the homeowner pays all defaulted payments or pays off the balance of the mortgage.
Types
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There are two types of foreclosure: judicial and non-judicial. The difference is a judicial foreclosure requires a court hearing and approval from the court system, whereas a non-judicial foreclosure does not require a court hearing. During a judicial foreclosure, both the lender and homeowner can plead their case in court. This is only applicable in states that offer a right to redeem the property, but does not apply to states such as Texas where lenders can foreclose on a property using a trustee, without a court appearance.
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Eviction Proceedings
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When a bank repossesses the property and ownership rights are transferred to the bank from the homeowner, eviction proceedings can begin. Eviction is a part of the foreclosure process, even though it occurs after the foreclosure has taken place. Since the bank owns the property after foreclosure, it has the right to evict the homeowner or tenants living in the home. Eviction proceedings can take an additional few weeks after the foreclosure and must be presented in front of a judge.
Time Frame
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Most lenders will not declare a legal foreclosure until the homeowner has missed four consecutive monthly payments. At that point, the loan is given to the bank's legal department. The legal department is responsible for filing the foreclosure with the county clerk's office as well as making sure the property is posted at the courthouse for potential auction. The legal department is also responsible for mailing a foreclosure notice to the homeowner and any co-borrowers on the loan.
Auction
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After the foreclosure notice has been sent to the homeowner and filed at the courthouse, the auction date will be set. At the auction, anyone is allowed to bid on the property, including the owner who has been foreclosed upon. If the bids on the property are not acceptable to the lender, the lender can opt to keep the property as a real estate owned property and list it for sale.
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References
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