What is foreclosure and how does it happen?
Does the homeowner have a chance to get back their home? Can I buy a home in foreclosure? Foreclosure is the final step in a process of a lender trying to recoup their money from a borrower who has defaulted on their loan. The first step on the road to foreclosure is the NOD or notice of default. After this there is a reinstatement period in the foreclosure process before the house is put up for auction. If the defaulted loan isn’t taken care of in this time period, a notice of sale is sent to the owner, posted on the property and in the newspaper and the home is put up for auction.
In this turning point in the foreclosure process, the home is either purchased by the highest bidder, meeting the reserve set by the bank to recoup their loan balance, interest and additional fees or the home is repossessed by the bank. At this point, the home becomes, bank or real estate owned (REO) property and can be purchased directly from them, often with a clean title.
Foreclosure is the process of a mortgage or lien holder exercising their legal right to reclaim the property if mortgage loan is in default. The process is a complicated one and sometimes and long drawn out process. Foreclosure laws can vary by area and it’s important to understand the foreclosure law of your state if you are in danger of being foreclosed upon or are an investor looking to cash in.
Foreclosure laws vary state by state and the process of a defaulting loan going into full out foreclosure differs according to your state law. Some states even offer a redemption period, in which one has a legal time period where they can repurchase their home. This is great for the homeowner and gives them kind of a last minute shot at keeping their home, however this can be a nerve wracking stumbling block for those looking to buy a foreclosure or bank owned home.
There are strict time guidelines and procedures to be followed with the courts and the lending institutions when it comes to foreclosure process. Foreclosure laws may offer you some relief and some options though, so check you state’s foreclosure law before proceeding with the process or purchasing a foreclosure home of your own.
Lenders in the state of Nevada may foreclose on a deed of trust or a mortgage in default using a judicial or non-judicial foreclosure process.
A judicial process of foreclosure requires that the lender file a lawsuit and attain a court order to foreclose on a particular property. This type of process is generally used when no power of sale is present in the mortgage or deed of trust. A power of sale is a clause found in a deed of trust or mortgage that authorizes the sale or transfer of land as outlined by the terms of that clause.
In the event that a judicial foreclosure process is used in Nevada, the borrower has one (1) year after the foreclosure sale to redeem the property.
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.
Power of Sale Foreclosure Procedure
If the deed of trust or mortgage has a power of sale clause and it details the time, place and terms of sale, then the outlined procedure must be followed. However, if the power of sale clause does not clarify the time, place and terms of sale, then a foreclosure sale is conducted as follows:
The borrower receives a copy of the notice of default and election to sell on the date the notice is recorded in the county where the property is located. Notice is generally sent by certified mail, return receipt requested, to the borrower’s last known address. The property is then advertised and posted pursuant to Nevada law as it pertains to an execution sale.
The borrower has three (3) months from the date a notice of default and election to sell is recorded by the deed of trust’s trustee to perform and cure the default. In order to cure the default, the borrower is often expected to pay the missed payments or other sums due to the lender, but not the accelerated loan balance. The property is sold at foreclosure if the borrower fails to redeem during this time.
The time of sale must be specified in the foreclosure notice and the property sold in the manner required by law for the sale of real property on execution.
The lender may sue for a deficiency within three (3) months after the foreclosure sale or within six (6) months after the date of foreclosure. Borrowers have no rights of redemption.