A legal action that lenders take when borrowers default on their loans is called a foreclosure. If you’ve borrowed money and are facing foreclosure, you can face long-term consequences.
In such circumstances, a hard money lender comes to your rescue by offering loan modifications. They try to modify your monthly payments to make them more affordable for you. However, they’ll also receive some monthly payments. Here’s all you need to know about the process:
What Is Foreclosure?
When you take a loan, you agree to the lender’s condition of reclaiming the property if you stop making payments on your loan. The foreclosure process can be non-judicial or judicial, depending on your state laws. Some even have both options available.
In a judicial foreclosure, a lawsuit is filed by the lender for a foreclosure. The court will then inform the borrower, who then fights the lawsuit; if they lose, the property is auctioned as a foreclosure by the bank or the lender.
In non-judicial foreclosures, if the borrower stops making payments, the power-of-sale mortgage clause helps recoup the balance owed by the borrowers. It authorizes the trustees (appointed by the lender) to sell the property to pay off the balance. The process is faster than under a judicial foreclosure as there is no court hearing.
When Does Foreclosure Begin?
When they fail to repay their mortgage installments, borrowers usually go through a series of steps before they face foreclosure. Defaulting your repayment agreement with your lender and failing to repay using alternative arrangements will result in foreclosure.
The repayment conditions are mentioned in the agreement you signed as part of your mortgage commitment. Be careful to refer to your agreement for particular rules governing your mortgage, as these agreements may differ by jurisdiction and lender.
What if the Property Sells for Less than I Owe?
If your property sells for less than the balance you owe to the bank or the lender, the lender files a deficiency judgment. It’s a lawsuit that requests the borrower to repay the remainder of the loan amount.
For example, if you owe $500,000 on your loan, but the property only sells for $375,000, $125,000 is still deficient. The lender then tries to recover that amount from you in terms of cash or any other payment method.
However, some states restrict deficiency judgments after foreclosure and have anti-deficiency laws.
Looking for private money lenders in Atlanta, GA? Get in touch with Commercial Private Equity. Apart from loans, we also provide commercial hard money loan consultation to guide you on the best practices for borrowing and repaying loans.