A loan is ordinarily documented by a promissory note. The person or company who places a loan evidenced by a promissory note with real estate pledged as collateral is called a mortgagor. The person or company who holds the note and mortgage is called the mortgagee.
Foreclosure refers to the legal process where a mortgagee who is not receiving payment or is otherwise suffering a default of some other part of the mortgage or note tries to recover the remaining balance of the loan. This usually results in the forced sale of the property used as collateral for the loan.
When a mortgage goes into default due to non-payment or some other violation, the strength of the language of the note and mortgage will be tested in court in the foreclosure case. VolkLaw can discuss with you the types of remedies available to our creditor clients and the types of defenses available to our debtor clients.
The objective for a foreclosing creditor is to end up with title to the property free of all other inferior liens like second mortgages. Note that an inferior lien holder can also foreclose and take the property subject to superior liens which then will require dealing with those superior lienholders who are likely to demand full payment.
Lender options include suing on just the note, mortgage foreclosure, having rents deposited into the court registry, and appointment of a receiver, are all available remedies if the documents so provide. Lender liability in taking ownership of the property is also an issue. Sometimes, lost instruments like an original note must be reestablished. A careful title search and identification of parties is crucial, and special steps must be taken when serving governmental or special entities such as churches. Attorneys add litem might need to be appointed when named parties are not able to be located.
Obtaining the judgment is not the end of the services needed by a foreclosing lender client. Redemption rights by the debtor or a junior lienholder may still come into play. The notice of sale must be advertised, and the sale must be attended, where the lender is permitted but not required to bid. Bid prices are important, as documentary tax stamps are payable on the bid amount. If the debtor declares bankruptcy, the action is stayed and stay relief or adequate protection must be obtained from the bankruptcy court.
A successful attorney is able to provide his or her client with an enforceable final judgment, which will include among other things late fees, interest, costs and attorney’s fees if the loan documents so provide. While foreclosure cases used to be resolved within 4-8 months, including the post-judgment advertising and sale, the recent glut of foreclosure cases has caused them to take longer if they are contested.
A borrower can challenge the legitimacy of a debt by defending against the foreclosure. It is up to the lender to prove they have valid grounds to foreclose. In the 2000s, the sale of loans skyrocketed including being bought and used as underlying value for a bond instrument called an asset backed security. In a number of cases since the real estate collapse, the Plaintiff in foreclosure cases were unable to prove they owned the note and mortgage and were unable to foreclose.
If you are a homeowner trying to avoid foreclosure, you have other options such as: a temporary workout arrangement with the lender, a short sale, refinancing, alternate financing, or bankruptcy. VolkLaw attorneys are very experienced in dealing with foreclosure proceedings. So, we can help you through this minefield.
The matters discussed here are general in nature and are not to be relied upon as . Every specific legal matter requires specific legal attention. The law is constantly changing and matters discussed today may not be the same tomorrow. Legal matters are also subject to different interpretations by attorneys, judges, jurors and scholars. No attorney-client relationship is intended or created as a result of matters discussed here. You should consult counsel of your choice if you have any dealings in these areas of the law. VolkLaw Offices, P.A. and its attorneys make no representations or warranties with respect to the accuracy or completeness of the matters addressed.