FORECLOSURE

Buying a piece of real estate is a gratifying experience. It is essentially the American Dream. It is almost always a great investment and if it is a house, it can be a home. At the real estate closing, the seller of real estate will sign over a DEED to the new owners of the real estate. Most Americans, regardless of socioeconomic status, get a loan from a bank to buy real estate. Th is loan is called a MORTGAGE LOAN. In order for the bank to feel safe about making a loan, the bank will want a SECURED INTEREST in the real property. This will allow the bank to repossess the house if the mortgage payments are not made. Oft en, only one buyer is required to sign the MORTGAGE NOTE or PROMISSORY NOTE, which legally binds the signor to pay a certain amount of money to the bank. The person(s) who signed the note is called the OBLIGOR. Even though not all owners are generally required to sign the note, the bank will require all the new owners of the real estate to sign a MORTGAGE AGREEMENT. With this agreement, the new owners certify that it is acceptable for the bank to record the legally binding agreement against the real estate. Th is is done so that if the bank ever needs to exercise its legal rights, the new owners who did not sign the NOTE cannot object to the bank taking the property back.

Often, a husband and wife will buy a house and only one of two signs the MORTGAGE NOTE. Regardless, both parties must sign the MORTGAGE AGREEMENT.

A foreclosure, properly known as a mortgage foreclosure, it is a process by which a bank reacquires title to real property (real estate). Th e bank usually does not want to initiate a foreclosure action. It does this only as a last resort and usually only after 3-5 months of nonpayment by the obligor(s). Th e process can be intimidating because all the owners of the real estate will be served a thick foreclosure packet by the sheriff or a representative of the sheriff. This packet is likely include the following:

SUMMONS: a legal description of the case, case number, the property, and the court where the case will be, and the judge assigned to the case

LIS_PENDENS: a legal document which ties up the title/deed to your property and lets the public know that there is a problem with the real estate.

COMPLAINT: this spells out in legal terms what went wrong with the property, when the OBLIGOR stopped paying and that the bank wants to and has the right to take the title back and repossess the property

Most oft en, the entire mortgage agreement and mortgage note will also be attached to the paperwork. Please note, ALL OWNERS will get a copy of the paperwork, and will be named as DEFENDANTS. The reason is because the bank wants the DEED back and the bank has to take the property away from all the owners (defendants). However, this does not mean, as most people mistakenly believe, that all the owners' credit reports will be aff ected. Only the OBLIGOR'S credit is on the line; after all, ONLY he signed a NOTE promising to pay money back to the bank.

Defendants have twenty (20) days to respond to the mortgage foreclosure paperwork. If they do not, then the bank can enter a DEFAULT, which essentially means that the defendants admit all the allegations of the complaint. Not answering the complaint is not recommended, especially for the obligor(s). Adrian Lynn & Associates, P.A. can help you fi le an answer with the court to preserve your legal rights.

Eventually, the bank's attorney will fi le a MOTION FOR SUMMARY JUDGMENT. Th e court will then set a hearing in front of the judge at which the bank will ask the court to set a SALE DATE. Most of the time, no defendants show up at these hearings. If a defendant does show up, he can generally ask the court for some extra time before the real estate is sold, sometimes as much as 120 days. If no defendant shows up, then the property will be set for sale about 25-30 days aft er the hearing. If you have an attorney, your attorney can attend the hearing on your behalf.

The FORECLOSURE SALE is an auction conducted by the county clerk of courts and lasts about 5 minutes. Either an investor or the bank itself will buy the property at the auction. To protect its interests, the bank may bid the price up to the amount of the payoff on the mortgage. Other times, there are no interested buyers so the bank may be able to buy the real estate back for as little as $100. Nonetheless, this is a legal formality for the foreclosure process and does not reduce the amount that the obligor owe the bank if the bank buys the property.

Once the bank has the property back, it will hire a real estate agent and sell the property. Then it will sell the property for what the property is worth. The property might be worth less the mortgage amount. If this occurs, the bank still has a right to sue any of the OBLIGORS for the diff erence. If the bank is successful, it will get a DEFICIENCY JUDGMENT against the OBLIGOR. The bank can then garnish (take) part of the OBLIGOR'S wages, bank accounts and other property.

That, in a nutshell, is the foreclosure process.