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Foreclosure rights vary by jurisdiction. Generally, there are two types of foreclosure: judicial and non-judicial foreclosure. Each type has very specific procedural requirements that must be met by the lender. Failure to follow the procedures will increase time frames and affect other foreclosure rights of the borrower.
Judicial foreclosure gives the borrower foreclosure rights as set forth in the laws of the specific jurisdiction. This process is used when the loan or mortgage documents do not include the right to a non-judicial sale of the mortgaged property. The lender must sue the borrower in court for non-payment. If the lender wins the case, the lender acquires a judicial order for foreclosure on the mortgaged property.
A borrower's foreclosure rights require that the lender sue the borrower for non-payment of the loan in issue. The borrower must receive notice of the lawsuit. Following proper receipt of notice of the lawsuit, the borrower has a period of time in which to answer the claims of the lawsuit. A number of defenses are available to the borrower to the lender’s right to sue for non-payment. The borrower should review any available defenses with an attorney in order to put forward the best argument against foreclosure.
In a non-judicial foreclosure proceeding, the mortgage in issue must contain a power of sale clause. This clause permits the lender to sell the mortgaged property in the event of a default on the note. The clause is intended to allow the lender to recover any unpaid balance on the note. Each mortgage’s power of sale clause sets the specific terms associated with the terms and procedures to be followed in the event of a default.
A borrower’s foreclosure rights in the non-judicial proceeding are such that the lender must follow the terms of the power of sale clause explicitly and give the borrower proper notice at each step in the process. When the mortgage doesn’t specifically set the terms of the sale process, the lender must provide the borrower with a demand letter for repayment of the unpaid balance on the mortgage within a period of at least 20 days. If the borrower fails to repay the unpaid balance during the period set forth in the demand letter, the lender must initiate the sale of the mortgaged property. The sale process includes scheduling a sale with the county clerk, posting notice of such sale on the courthouse door, and providing the borrower with notice of the sale. All notices must give at least 21 days prior notice of the sale.
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