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Foreclosure Process

Foreclosure Process

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Published by LaShea Miller
This a look at the basics of the foreclosure process and some key terms that everyone should know.
This a look at the basics of the foreclosure process and some key terms that everyone should know.

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Published by: LaShea Miller on Feb 22, 2009
Copyright:Attribution Non-commercial


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What is saleforeclosure?

a of a piece of real estate A foreclosure is the forced
to repay a debt.

Indebtness can be in the form of:

• • • • • •

Mortgage Unpaid property taxes Builder and mechanic liens Delinquent income taxes Property seizure Forfeiture on account of criminal activities

Steps in the Foreclosure Process

• Pre-foreclosure
• Occurs within 30 days following the default on a payment.
• After attempting to notify the borrower of the consequences the lender will send a formal notice of default to the borrower within a specific timeframe.

• Redemption period is the time which the property can be reclaimed by paying the past-due amounts or loan balance. • The redemption period will vary from state-to-state.

• Auction • The auction can occur:
– a sheriff’s sale – a private party.

• Risky because investors have limited means of viewing the property prior to the sale.

• REO (Real Estate Owned Property) • REOs are properties owned by a lender as the result of default by borrower and subsequent foreclosure by the institution.

• The risk for investors buying REOs may be less REOs cont’d • The return on investment could be less too.

Facts You Should Know…..

• The foreclosure process from Notice of Default to Judicial sale is 300 days in Illinois.

Facts You Should Know…

• There are two types of foreclosures: • Judicial-Court-ordered action. • Non-judicial take less time to complete because the borrower preauthorizes the sale of the home in the loan document in the form of a trust deed.

It’s importance….

• Judicial foreclosures occur in lien-theory states. • Non-judicial foreclosures occur in title-theory states.

• Illinois is a lien theory state.

Important Facts

• In a lien-theory state, the deed is in the name of the borrower and the lender places a lien on the property. • The lien theory takes up more time in a foreclosure procceeding.

More important facts…

• In a title theory state, the lender holds title to the property in the name of the borrower through a deed of trust. The title remains in the name of the lender until the loan is paid in full.

• Some states have a combination of both lien and title theory which is called intermediate theory.
– The borrower’s name appears on the title as the owner – When the owner defaults, ownership transfers to the lender.


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