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4 Foreclosure and Lender Procedural Requirements

A foreclosure is a serious legal proceeding in which the homeowner is in the process of having their home taken away from them. Because of this, courts generally pay a great deal of attention to foreclosure proceedings and make sure that all parties perform to the strict letter of the law. While a foreclosure usually indicates that the individual is unable to continue to pay the promissory note or mortgage on their property, it does not necessarily always lead to an individual losing their home. In order to foreclose on a property the lender must strictly follow all foreclosure requirements according to state law. If the lender violates this process, it provides grounds for the homeowner to stop the foreclosure process.

Inform and Advise

Generally, the lender must follow specific steps to initiate, follow through, and finalize a foreclosure. Initially, a lender must typically inform the homeowner about their options for mediation regarding missed payments on the mortgage or promissory note. The lender also must provide the homeowner with referrals to counseling agencies and legal programs that provide options to avoid foreclosure, depending on the particular state the foreclosure is being initiated in. Failure to follow the specific guidelines set forth by state law may allow the homeowner to challenge the foreclosure.

Notice of Breach

The next step in the foreclosure process requires the lender to send a breach letter to the homeowner informing them that they are in default of their loan or promissory note. The breach letter will detail the actual default, what is required to cure the default, the date by which this action must occur, and that failure to do so will result in the sale of the property. Once the breach letter has been sent, the lender must provide a notice that details the timeline of the foreclosure, which will include all of the important milestones and their dates as the foreclosure process proceeds up until the actual time of sale.

Option to Correct Deficiency

All notices that the lender is required to deliver generally must contain specific information as well as specific time limits that give the homeowner all of the information they might need to cure the default at any time during the foreclosure proceeding. It is important to note that at any time during a foreclosure, the homeowner has the option to repay the outstanding balance on the mortgage or promissory note which will immediately cure the default and stop foreclosure proceedings.

Cause for Reset

Depending on the specific requirements of the state law, if the lender does not follow each particular procedure exactly as it is set forth in the law or violates strict timelines in any way, the homeowner may have the opportunity to force the lender to restart the foreclosure proceedings. While this will not prevent eventual foreclosure from occurring, it can buy a homeowner the time they need to get back on their feet financially and get current with their mortgage or promissory note. Homeowners should always be aware of their rights during foreclosure proceedings and consult with an attorney if they feel that the lender has failed to adhere to the requirements set forth by the law covering foreclosure proceedings.