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Lenders Must Follow Foreclosure Law

Despite all the legal wrangling available to lenders to recoup the investments they make when issuing mortgages for home purchases, they still must follow foreclosure law before they can claim a property as their own. Every state has its own foreclosure law lenders must follow, and there are differences between them. It is best to contact the attorney general in that state to learn your rights as a lender or as a borrower if foreclosure seems eminent.

Most states will allow a borrow up to about six months before a foreclosure is granted to a lender, but this time limit does vary by state and foreclosure law provides a minimum time that lenders must wait before taking steps to begin foreclosure proceedings. The time considered as a grace period to make a due payment may as short as five days or as long as 15 days, depending on the state foreclosure law and the agreement signed at the time the mortgage was issued.

In most states a borrower also has the option to bring their mortgage payments up to date which will usually stop foreclosure proceedings, but again different states’ foreclosure law will dictate if the lender must accept the payments after a certain time limit.

Loopholes In Laws Sometimes Harms Lenders

In many states a judicial foreclosure is required, according to foreclosure law during which a judgment is sought by the lender and a court determines the amount the borrow owes. The borrower is then given a certain amount of time in which to make payment and failing to do so the court will order the property sold.

Once the order to sell has been given and before the auction date, the property must be appraised by at least three disinterested appraisers with that county. When the property is sold at auction by order of the court, it cannot be sold for less than two thirds of the appraised value. Sometime this may be higher than the amount owed, or it could be less than what is owed, in which case the borrower is still responsible for any balance.

However, some states allow the buyer to redeem the property by paying the amount the court determines to be owed plus costs and legal fess and interest before the foreclosure sale is confirmed. Most foreclosure law is to protect the lender from losing money they fronted for the mortgage, but it also provides protection again unethical lenders from granting loans far above the market value and then foreclosing on the mortgages for being one day late.