What exactly is a foreclosure?
Given the state of the nation’s housing market (especially in Sarasota and Manatee County, Florida, where I practice) and unless you’ve been living in a cave for the last two years, you’ll probably hear the term “foreclosure” a thousand times a day. day. day, but what exactly does the word mean? You are about to discover…
A mortgage is the “pledge of real estate as security for a debt.” When you “mortgaged your home,” you made an agreement with the lender that, in return for lending you the money to purchase the property (the agreement for the “money part” of the transaction is called a “promissory note”), you You would pledge the house as “collateral” for that debt (the “pledged” part of the transaction is called the “mortgage”).
In simple terms, you agree that if you don’t pay the money back, they can keep the house! The “promissory note” proves that you borrowed the money in the first place, and the “mortgage” is your permission for the lender to place a “lien” on the property and repossess it through a process called “foreclosure” if you stop paying the loan. It is a simple commercial contract.
To go a step further, some states (all real estate laws are state law, which means the rules are slightly different in each of the 50 states) require “judicial foreclosure” and others allow “judicial foreclosure.” nonjudicial mortgage.
Florida is a “judicial foreclosure” state, which simply means that a lender is never allowed to automatically foreclose on a property as a term of the contract, but must always pursue a judicial proceeding (before a judge, hence the term judicial foreclosure) to repossess a property.
In a foreclosure state, a foreclosure is nothing more than a particular type of judgment. It begins when the lender “files” with the court in the county where the property is located, after which a notice of complaint is issued (“papers are served”) to the borrower and any other parties having rights/claims to the property .
Depending on the jurisdiction, the loan will have a certain amount of time to respond to the complaint, and the lender will have a certain amount of time to respond to the borrower’s response, etc… the process can be lengthy and in some places where a Foreclosure can take a couple of years to resolve.
So now you know what a foreclosure is!