Understanding Foreclosure

There are a lot of terms to get familiar with when you are learning and weighing the options with foreclosure. Here are a few concepts you’ll want to educate yourself on if you are facing foreclosure.

Mortgages and deeds of trust with Foreclosure

When you received your loan to buy your house you made an agreement that the loan would be secured by the house, which meant that in case of default the owner of the loan could foreclose and take ownership of the house, thus evicting you. Such security agreements are filed and recorded in the local land records office. This security agreement is either called a mortgage or a deed of trust. This title is determined by the state. Though there are exceptions, mortgages can only be foreclosed in court, while deeds of trust can be foreclosed without court proceedings.

First, Second, and Third Mortgages

A first mortgage is the first loan you took out to buy your home. A loan is deemed a second mortgage if you also borrowed a lesser amount for the down payment, or if you later took out a loan against your equity. If you took out a third loan or arranged a line of credit to be secured by your home, that loan is called a third mortgage.

Lenders and Mortgage Servicers

Most likely the mortgage originator, either the bank or lender, quickly sold the mortgage to another entity who then resold it, and so on. While you are supposed to be notified of these transactions, there is no requirement for these notices to be fully understood. So what results is that you may not know who truly owns your mortgage and thus, who is entitled to foreclose if you default.

Whether or not you know who your lender is, you’ve probably been dealing with a mortgage servicer, which is a company that receives your payments and passes them on to whoever is entitled to receive them.

The mortgage servicer will represent the lender in negotiations if you default on payments but still want to keep your house. And if negotiations fail, the actual foreclosure proceeding will be initiated either by the lender itself or by a trustee authorized to foreclose (if the loan document was a deed of trust).U

For information and guidance on foreclosure, you need the experts at Resnik Hayes Moradi LLP.

Source: Nolo.com, The Nuts and Bolts of Foreclosure, 2014

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