Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
154-602: The 2010 United States foreclosure crisis , sometimes referred to as Foreclosure-gate or Foreclosuregate , refers to a widespread epidemic of improper foreclosures initiated by large banks and other lenders. The foreclosure crisis was extensively covered by news outlets beginning in October 2010, and several large banks—including Bank of America , JP Morgan , Wells Fargo , and Citigroup —responded by halting their foreclosure proceedings temporarily in some or all states. The foreclosure crisis caused significant investor fear in
308-601: A freedom of contract regime. Mortgage and foreclosure were used as a means by the Dutch and other colonists to acquire land from native peoples in North America. This was a successful endeavor partially due to cultural differences in the understanding of land ownership. The practice followed a series of steps. Colonists would draw native peoples into their debts through credit that the natives would then need to create mortgages to repay. The debt would generally be one that
462-484: A lawsuit against the borrower. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state in the US. A judicial decision is announced after the exchange of pleadings at a (usually short) hearing in a state or local court in the US. In some rather rare instances, foreclosures are filed in US federal courts. A judicial officer supervises
616-409: A mortgage lender (mortgagee) , or other lienholder , obtains a termination of a mortgage borrower (mortgagor) 's equitable right of redemption , either by court order or by operation of law (after following a specific statutory procedure). Usually, a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and
770-657: A "loan modification process". California has enacted legislation to eliminate this type of "dual-tracking" – The Homeowner Bill of Rights – AB 278, SB 900, That went into effect on January 1, 2013. A 2011 research paper by the Federal Reserve Board , “The Post-Foreclosure Experience of U.S. Households,” used credit reports from more than 37 million individuals between 1999 and 2010 to measure post-foreclosure behavior, especially in regard to future borrowing and housing consumption. The study found that: 1) On average 23% of people experiencing foreclosure had moved within
924-458: A "variety of practices. It can mean a qualified executive in the mortgage industry signs a mortgage affidavit document without verifying the information. It can mean someone forges an executive's signature, or a lower-level employee signs his or her own name with a fake title. It can mean failing to comply with notary procedures. In all of these cases, robo-signing involves people signing documents and swearing to their accuracy without verifying any of
1078-607: A 26% increase in 2010, 23% in Seattle, Washington and 21% in Atlanta, Georgia . These cities had the lowest rates of unemployment. On the opposite end of the spectrum, the cities with the lowest rates of foreclosure were Rome, NY; South Burlington, VT; Charleston, WV; Bryan, TX; and Tuscaloosa, AL. Not surprisingly, these areas had some of the highest nationwide rates of unemployment , helping to further demonstrate this correlation. A quote from RealtyTrac CEO James Saccacio summarizes
1232-630: A September event in D.C. honoring President Calvin Coolidge. Sen. Robert Casey (D-PA), who was ushering through many pieces of last-minute legislation on behalf of the Democratic leadership on the final day before the Senate adjourned for recess, moved the bill from the Judiciary committee for a vote. Sen. Jeff Sessions (R-AL) helped gather Republican support for the bill. The Senate then passed
1386-485: A blogger, called them "robo signers" in a January 8, 2010 posting. In 2009, Maine attorney Thomas Cox pointed out the wide-scale practice of robo-signing in depositions taken of GMAC 's Jeffrey Stephan and other robo-signers. News outlets reported that on September 14, 2010, Jeffrey Stephan testified that he had signed affidavits which he hadn't actually reviewed on behalf of Ally Financial . This revelation led to increased scrutiny of foreclosure documentation. The practice
1540-475: A few other U.S. states. Foreclosure by judicial sale, commonly called judicial foreclosure , involves the sale of the mortgaged property under the supervision of a court. The proceeds go first to satisfy the mortgage, then other lien holders, and finally the mortgagor/borrower if any proceeds are left. Judicial foreclosure is available in every US state and required in many (Florida requires judicial foreclosure). The lender initiates judicial foreclosure by filing
1694-475: A foreclosure filing. This figure falls in the higher spectrum of foreclosure frequency. As of August 2014, the foreclosure rate was 33.7%, 1.7% up from the last year. The rise in foreclosure activity has been most significant in New York and New Jersey, the two most densely populated areas in U.S. Closely following them is Florida. Mortgagee A mortgage is a legal instrument of the common law which
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#17327834403311848-677: A foreclosure, because MERS does not own the loans in question. U.S. lending laws state that only the owner of a loan can initiate a foreclosure. Class action law suits against MERS are pending in California , Nevada , and Arizona . State courts remain sharply divided on the propriety of this practice. State supreme courts in Maine , Arkansas , and Kansas have ruled against MERS right to file for foreclosures. MERS has however won court cases in other states such as Michigan , affirming its right to initiate foreclosures in those states. For example,
2002-530: A frivolous defense. The entire point of nonjudicial foreclosure is that there is no state actor (i.e., a court) involved. The constitutional right of due process protects people only from violations of their civil rights by state actors, not private actors. (The involvement of the county clerk or recorder in recording the necessary documents has been held to be insufficient to invoke due process, since they are required by statute to record all documents presented that meet minimum formatting requirements and are denied
2156-525: A large number of claimants with security interest in the mortgage. There is some support behind this theory, but an analysis of the data found that renegotiation rates were similar among unsecuritized and securitized mortgages. The authors of the analysis argue that banks don't typically renegotiate because they expect to make more money with a foreclosure, as renegotiation imposes "self-cure" and "redefault" risks. Government supported programs such as Home Affordable Refinance Program (HARP) may provide homeowners
2310-433: A lender may foreclose on the mortgaged property if certain conditions—principally, non-payment of the mortgage loan – apply. A foreclosure will be either judicial or extrajudicial (non-judicial), depending upon whether the jurisdiction within which the property to be foreclosed interprets mortgages according to title theory or lien theory, and further depending upon the type of security instrument used to secure
2464-421: A lender proof of compliance with the 90-day pre-foreclosure notice requirement in order to delay and prolong forecosure proceedings giving the borrower an extra 3 months to clean their record and pay off debt. When the entity (in the US, typically a county sheriff or designee) auctions a foreclosed property the noteholder may set the starting price as the remaining balance on the mortgage loan. However, there are
2618-481: A lien theory state. Even so, the Georgia Legislature has formally provided for a lender being able to secure its loan by means of having legal title to a collateralized property conveyed to it. The so-called "Deed to Secure Debt" is a security instrument used in the state of Georgia to accomplish securing of a debt by means of the passing of legal title to real property. Though it is characterized within
2772-423: A mortgage by legal charge or technically "a charge by deed expressed to be by way of legal mortgage", the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it. To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt
2926-413: A mortgage has the effect of a deed passing legal title, though conditionally, of the mortgaged property to the mortgagee (the lender in a loan agreement being secured by the mortgage), with so-called "equitable title" (which is really equity of redemption ) being retained by the mortgagor (the borrower in the loan). The fact of the mortgagor's retaining of the "equity of redemption" is the fact which renders
3080-422: A mortgage is viewed as creating a lien on the mortgaged property until such a time as an event of default occurs pursuant to the loan contract. After such a time, the same mortgage is construed under title theory. This is accomplished by the inclusion of a stipulation within the loan contract to the effect that the borrower is allowed to retain legal title to the collateralized property with the express agreement that
3234-414: A mortgage within "title theory" jurisdictions. Hypothetically, if "absolute" or "perfect" title were held by a grantee such that the grantor did not retain the equity of redemption , then the grantee/lender would theoretically not have need to foreclose upon the grantor/borrower, but rather might cure a default by simple means of eviction or "summary reposession". However, foreclosure, albeit extrajudicial,
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#17327834403313388-840: A mortgage. Overall, the authors conclude that it is “difficult to say whether this small effect is because the shock that leads to foreclosure is not long-lasting, because the credit constraints imposed by having a foreclosure on one’s credit report are not large, or because housing services are more inelastic than other forms of consumption." Recent housing studies indicate that minority households disproportionately experience foreclosures. Other overly represented groups include African Americans, renter households, households with children, and foreign-born homeowners. For example, statistics show that African American buyers are 3.3 times more likely than white buyers to be in foreclosure, while Latino and Asian buyers are 2.5 and 1.6 times more likely, respectively. As another statistical example, over 60 per cent of
3542-518: A nonjudicial sale held by the trustee through a power of sale. It is also possible to foreclose them through a judicial proceeding. Deeds of trust to secure repayments of debts should not be confused with trust instruments that are sometimes called deeds of trust but that are used to create trusts for other purposes, such as estate planning. Though there are superficial similarities in the form, many states hold deeds of trust to secure repayment of debts do not create true trust arrangements. Georgia
3696-609: A nonpossessory lien on the title to the mortgaged property, while the mortgagor still holds both legal and equitable title. Four types of security over real property are commonly used in the United States: the title mortgage, the lien mortgage, the deed of trust , and particularly within the State of Georgia, the security deed . In the United States, these security instruments proceed off of debt instruments drawn up in
3850-444: A number of issues that affect how pricing for properties is considered, including bankruptcy rulings. In a weak market, the foreclosing party may set the starting price at a lower amount if it believes the real estate securing the loan is worth less than the remaining principal of the loan. Time from notice of foreclosures to actual property sales depends on many factors, such as the method of foreclosure (judicial or non-judicial). When
4004-422: A parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a " mortgage " or " deed of trust ". Commonly, the violation of the mortgage is a default in payment of a promissory note , secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it
4158-512: A sale of the property to pay the debt. Many mortgages contain a power of sale clause, also known as nonjudicial foreclosure clause, making them equivalent to a deed of trust. Most "mortgages" in California are actually deeds of trust. The effective difference is that the foreclosure process can be much faster for a deed of trust than for a mortgage, on the order of 3 months rather than a year. Because this foreclosure does not require actions by
4312-419: A year of the foreclosure process starting. In the same time, a control group (not facing foreclosure) had only a 12% migration rate; 2) Only 30% of post-foreclosure borrowers moved to neighborhoods with median income at least 25% lower than their previous neighborhood; 3) The majority of post-foreclosure migrants do not end up in substantially less-desirable neighborhoods or more crowded living conditions; 4) There
4466-521: Is 70 – 135 points, and a finalized foreclosure, short sale or deed-in-lieu is 85 – 160 points. In 2009, the United States Congress tried to rescue the economy with a $ 700 billion bailout for the financial industry; however, there was a growing consensus that the deepening collapse of the housing market was at the heart of the country's acute economic downturn. After spending billions of dollars rescuing financial institutions only to see
4620-509: Is absolutely no connection whatsoever between the Interstate Recognition of Notarizations Act of 2010 and the recent foreclosure documentation problems… The bill expressly requires lawful notarizations, and in no way validates improper notarizations. Enforcement of legal notarizations is a state responsibility and I fully support each state attorney general vigorously prosecuting all notarization fraud.” On February 9, 2012, it
4774-406: Is an action in equity. To keep the right of redemption, the debtor may be able to petition the court for an injunction. If repossession is imminent, the debtor must seek a temporary restraining order. However, the debtor may have to post a bond in the amount of the debt. This protects the creditor if the attempt to stop foreclosure is simply an attempt to escape the debt. A debtor may also challenge
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4928-402: Is available in a few states including Connecticut, New Hampshire and Vermont, if the mortgagee wins the court case, the court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of
5082-533: Is cleared. This effect is the same as the strict foreclosure that occurred in English common law of equity as a response to the development of the equity of redemption . In most jurisdictions, it is customary for the foreclosing lender to obtain a title search of the real property and to notify all other persons who may have liens on the property, whether by judgment , by contract , or by statute or other law, so that they may appear and assert their interest in
5236-473: Is conditional, and the security deed effectively functions as a mortgage construed under title theory. Upon the execution of such a deed, "legal title" passes to the grantee or beneficiary (usually lender), while the grantor (borrower) maintains "equitable title" to use and enjoy the conveyed land subject to compliance with debt obligations. In this, the security deed in Georgia operates no differently than does
5390-406: Is exactly equivalent to an English mortgage by legal charge or American lien-theory mortgage . In Anglo-Saxon England , when interest loans were illegal, the main method of securing realty was by wadset ( ME wedset ). A wadset was a loan masked as a sale of land under right of reversion . The borrower (reverser) conveyed by charter a fee simple estate , in consideration of a loan, to
5544-474: Is found to be necessary in Georgia to cure a default. Because of the apparently self-contradictory nature of the Georgia statute, the Courts within Georgia have construed the operation of security deeds to mean that the grantor retains the equity of redemption , such that non- or extrajudicial foreclosure is necessary as a remedy for default on a loan. In order to be effectual, security deeds must be recorded in
5698-481: Is given and the property upon which it is to take effect." It is clear, then, that mortgages are construed within the Official Georgia Code and by the Courts of the State of Georgia as placing a lien upon a mortgaged property in favor of the mortgagee, while the mortgagor retains both legal and equitable title to that property. It is equally clear, then, that Georgia is, by virtue of the foregoing facts,
5852-407: Is often stated to be a title theory state, but such is not the case. Note O.C.G.A. §44-14-30, which states clearly that "A mortgage in this state is only security for a debt and passes no title." Also note O.C.G.A. §44-14-31, which states that "No particular form is necessary to constitute a mortgage. However, a mortgage must clearly indicate the creation of a lien and must specify the debt for which it
6006-410: Is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real estate property to make certain that there are no mortgages already registered on the debtor's property which might have higher priority. Tax liens , in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent
6160-517: Is referred to as the "Equitable Theory of Mortgages". Under lien theory. a mortgage acts to place a lien on the mortgaged property in favor of the mortgagee, and legal title is retained by the mortgagor. Judicial foreclosure is most often necessary as a remedy to default pursuant to mortgages within lien theory jurisdictions, and this process has been found to be cumbersome, time-consuming and costly. Resultantly, lenders within lien theory jurisdictions most often have recourse to non-mortgage instruments for
6314-452: Is typically said that "the lender has foreclosed its mortgage or lien ". If the promissory note was made with a recourse clause and if the sale does not bring enough to pay the existing balance of principal and fees, then the mortgagee can file a claim for a deficiency judgment . In many states in the United States, items included to calculate the amount of a deficiency judgment include the loan principal, accrued interest and attorney fees less
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6468-413: Is used to create a security interest in real property held by a lender as a security for a debt, usually a mortgage loan . Hypothec is the corresponding term in civil law jurisdictions, albeit with a wider sense, as it also covers non-possessory lien . A mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from
6622-467: Is usually 30 days, but for commercial property it can be 10 days. The notice of acceleration is called a Demand and/or Breach Letter. In the letter it informs the Borrower(s) that they have 10 or 30 days from the date on the letter to reinstate their loan. Demand/Breach letters are sent out by Certified and Regular mail to all notable addresses of the Borrower(s). Also in the acceleration of the mortgage
6776-646: The Third District Court of Appeals in Florida ruled, in 2007, that "... it is apparent - and we so hold - that no substantive rights, obligations or defenses are affected by the use of the MERS device, [so] there is no reason why mere form should overcome the salutary substance of permitting the use of this commercially effective means of business." In an apparent attempt to resolve some of the issues with missing, lost, and sometimes fraudulent paperwork both
6930-564: The United States House of Representatives and the United States Senate passed H.R. 3808 which would force courts to recognize out of state and electronic notarizations. The bill passed the Senate through a verbal vote , and wasn't publicly debated. President Barack Obama , fearing "unintended consequences on consumer protections" utilized his veto powers, at first using a pocket veto by simply not signing
7084-484: The acceleration clause goes into effect. It can declare the entire payable debt to the lender if the borrower(s) were to transfer the title at a future date to a purchaser. The clause in the mortgage also instructs that a notice of acceleration must be served to the obligated mortgagor(s) who signed the Note. Each mortgage gives a time period for the debtor(s) to cure their loan. The most common time periods allot to debtor(s)
7238-415: The equity of redemption . This arrangement, whereby the lender was in theory the absolute owner, but in practice had few of the practical rights of ownership, was seen in many jurisdictions as being awkwardly artificial. By statute the common law's position was altered so that the mortgagor (borrower) would retain ownership, but the mortgagee's (lender's) rights, such as foreclosure , the power of sale, and
7392-493: The jurisdiction . In the English-speaking world this means either a general legal practitioner, i.e., an attorney or solicitor , or in jurisdictions influenced by English law , including South Africa , a (licensed) conveyancer . In the United States, real estate agents are the most common. In civil law jurisdictions conveyancing is handled by civil law notaries . Because of the complex nature of many markets
7546-399: The trustee's deed upon sale . In this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy to temporarily stay the foreclosure) to stop the sale, the mortgagee or its representative conduct a public auction in a manner similar to the sheriff's auction. Notably, the lender itself can bid for the property at
7700-506: The "ruling" (widely referred to as the "Credit River Decision") was ruled a nullity by the courts. In a recent New York case, the Court rejected a lender's attempt to foreclose on summary judgment because the lender failed to submit proper affidavits and papers in support of its foreclosure action and also, the papers and affidavits that were submitted were not prepared in the ordinary course of business. Many borrowers' attorneys will establish
7854-436: The "title theory of mortgages") or hypothecates title by way of a nonpossessory lien (according to the "lien theory of mortgages") to a lender for the performance under the terms of a mortgage note. In slightly less than half of states, a mortgage creates a lien on the title to the mortgaged property. Foreclosure of that lien almost always requires a judicial proceeding declaring the debt to be due and in default and ordering
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#17327834403318008-436: The 2009 "Making Home Affordable" plan have offered incentives to renegotiate mortgages. Renegotiations can include lowering the principal due or temporarily reducing the interest rate. A 2009 study by Federal Reserve economists found that even using a broad definition of renegotiation, only 3% of "seriously delinquent borrowers" received a modification. The leading theory attributes the lack of renegotiation to securitization and
8162-629: The District of Columbia entered the Consent Order on September 30, 2014. The consent order addressed SunTrust's alleged misconduct regarding its mortgage servicing and foreclosure practices. SunTrust was also required to create a 40 million dollar fund for the approximately 45,000 SunTrust borrowers who were foreclosed upon between January 1, 2008, and December 31, 2013. In addition, SunTrust was required to adhere to significant new homeowner protections. The consent order required that SunTrust follow
8316-489: The House on April 27, 2010. The bill was co-sponsored by Rep. Bruce Braley (D-IA), Rep. Mike Castle (R-DE) and Rep. Artur Davis (D-AL). The bill was voted on in the U.S. Senate on Sept. 27 at the urging of Senate Judiciary Chairman Patrick Leahy (D-VT). Leahy's staff said that they had received calls from "constituents" pressing for passage of the bill. But Leahy may have supported the bill after being lobbied by notaries at
8470-557: The IRON Act (H.R. 1979), sponsored by Aderholt in 2005, passed the House of Representatives in December 2006. The same bill was later sponsored by U.S. Sen. Tom Carper (D-DE) and introduced in the U.S. Senate Judiciary Committee as S.2083 in 2007, but it ultimately stalled. The bill was again sponsored by Aderholt (R-AL) and introduced in the U.S. House of Representatives as H.R. 3808 on October 14, 2009. It passed by voice vote in
8624-721: The NMS the second largest civil settlement in U.S. history, only trailing the Tobacco Master Settlement Agreement . The five banks were also required to comply with 305 new mortgage servicing standards. Oklahoma under then-Attorney General Scott Pruitt held out and agreed to settle with the banks separately. Joseph A. Smith, Jr., the North Carolina Commissioner of Banks, was tapped to be the Settlement Monitor. He created
8778-602: The Office of Mortgage Settlement Oversight (OMSO) to ensure the banks were providing relief to homeowners and complying with the new mortgage servicing standards as required by the NMS. The Federal government together with state attorneys general in 49 states and the District of Columbia reached a settlement in 2014 requiring SunTrust Mortgage, Inc., to provide $ 500 million (~$ 634 million in 2023) in various forms of relief to borrowers. The United States District Court for
8932-470: The Official Code of Georgia (the "O.C.G.A.") to be an "absolute conveyance" of title, it is, in fact, not, for the grantor of the deed in this scheme does retain the " equity of redemption ", otherwise known as "equitable title". The nature of the Georgia "Deed to Secure Debt" is set forth in O.C.G.A. §44-14-60, within which (somewhat oxymoronically) it is stated that: "Such conveyance shall be held by
9086-715: The U.S. A 2014 study published in the American Journal of Public Health linked the foreclosure crisis to an increase in suicide rates. One out of every 248 households in the United States received a foreclosure notice in September 2012, according to RealtyTrac . "Robo-signing" is a term used by consumer advocates to describe the rubber-stamp process of mass production of false and forged execution of mortgage assignments, satisfactions , affidavits , and other legal documents related to mortgage foreclosures and legal matters being created by persons without knowledge of
9240-580: The US federal district court for the Northern District of Ohio has dismissed numerous foreclosure actions by lenders because of the inability of the alleged lender to prove that they are the real party in interest. The same happened in a Colorado district court case in June 2008. In contrast, in six federal judicial circuits and the majority of nonjudicial foreclosure states (like California), due process has already been judicially determined to be
9394-501: The United States over the potentially fraudulent practice of robo-signing. On September 21, 2010, HousingWire ran an article citing defects in affidavits used in some foreclosure cases at Ally Financial, formerly known as GMAC Mortgage. "This situation with GMAC isn't limited to GMAC," Margery Golant, of Golant & Golant, a foreclosure law firm in Boca Raton, Florida , said in an interview with HousingWire reporter Jon Prior. "All
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#17327834403319548-507: The ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower. The relatively slow, expensive and cumbersome process of judicial foreclosure is a primary motivation for the use of deeds of trust , because of their provisions for non-judicial foreclosures by trustees through "power of sale" clauses. There are three legal theories pertaining to mortgages: title theory, lien theory, and intermediate theory. These three theories pertain particularly to
9702-551: The ability to refinance their mortgages if they are unable to obtain a traditional refinance due to their declined home value. A dual-tracking process appeared to be in use by many lenders, however, where the lender would simultaneously talk to the borrower about a "loan modification", but also move ahead with a foreclosure sale of the borrower's property. Borrowers were heard to complain that they were misled by these practices and would often be "surprised" that their home had been sold at foreclosure auction, as they believed they were in
9856-460: The acceleration has expired and the Lender can move forward with foreclosing on the property. The lender will also include any unpaid property taxes and delinquent payments in this amount, so if the borrower does not have significant equity they will owe more than the original amount of the mortgage. Lenders may also accelerate a loan if there is a transfer clause, obligating the mortgagor to notify
10010-440: The amount the lender bid at the foreclosure sale. The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. In the United States, Canada and many other countries, several types of foreclosure exist. In the US for example, two of them—namely, by judicial sale and by power of sale —are widely used, but other modes are possible in
10164-415: The argument that the mere legislative act of authorizing or regulating the nonjudicial foreclosure process thereby transforms the process itself into state action. In turn, since there is no right to due process in nonjudicial foreclosure, it has been held that it is irrelevant whether the borrower had actual notice (i.e., subjective awareness) of the foreclosure, as long as the foreclosure trustee performed
10318-452: The auction, and is the only bidder that can make a "credit bid" (a bid based on the outstanding debt itself) while all other bidders must be able to immediately (or within a very short period of time) present the auctioneer with cash or a cash equivalent like a cashier's check . The highest bidder at the auction becomes the owner of the real property, free and clear of interest of the former owner, but possibly encumbered by liens superior to
10472-404: The bill by unanimous consent without debate. Aderholt said that he and supporters “were surprised that it came through at the eleventh hour there” in the Senate. President Obama vetoed the bill on Oct. 8, following outcry from homeowner advocates and increased scrutiny from the press. Ohio's Secretary of State, Democrat Jennifer Brunner , emerged as one of the earliest critics of the bill, calling
10626-855: The bill, and later by issuing a more formal protective-return veto . The Interstate Recognition of Notarizations (IRON) Act of 2010 would have required “any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce.” The bill, written by U.S. Rep. Robert Aderholt (R-AL) to help court stenographers in his district alleviate issues with getting courts in other states to accept depositions notarized in Alabama, came under criticism in October 2010 from homeowner advocates who said it would have made it easier for mortgage processors to foreclose on homeowners without proper documentation or chain of title . The first version of
10780-430: The borrower may approach a mortgage broker or financial adviser to help him or her source an appropriate lender, typically by finding the most competitive loan. The debt instrument is, in civil law jurisdictions, referred to by some form of Latin hypotheca (e.g., Sp hipoteca , Fr hypothèque , Germ Hypothek ), and the parties are known as hypothecator (borrower) and hypothecatee (lender). A civil-law hypotheca
10934-507: The borrower remains responsible for any remaining debt, through a deficiency judgment . In some jurisdictions, first mortgages are non-recourse loans, but second and subsequent ones are recourse loans. Specific procedures for foreclosure and sale of the mortgaged property almost always apply, and may be tightly regulated by the relevant government. In some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries,
11088-399: The borrower was a single day late in repaying the debt, he forfeited his land to the lender while still remaining liable for the debt. Increasingly the courts of equity began to protect the borrower's interests, so that a borrower came to have under Sir Francis Bacon (1617–21) an absolute right to insist on reconveyance on redemption even if past due. This right of the borrower is known as
11242-406: The common law rule that the party seeking rescission of a contract must first return all benefits received under the contract. In other words, to challenge an allegedly wrongful foreclosure, the borrower must make legal tender of the entire remaining balance of the debt prior to the foreclosure sale. California has one of the strictest forms of this rule, in that the funds must be received by
11396-435: The continent—was to execute together the wadset and a separate back-bond according the reverser an in personam right of reverter. An alternative practice imported from Norman law was the usufructory pledge of real property known as a gage of land . Under a gage the borrower (gagor) conveyed possession but not ownership to the lender (gagee) for an unlimited term until redemption. The gage came in two forms: The gage
11550-418: The cost of credit (because it must always have the cost of recovering collateral built-in). Lenders have also argued that taking foreclosures out of the courts is actually kinder and less traumatic to defaulting borrowers, as it avoids the in terrorem effects of being sued. In response, a slight majority of U.S. states have adopted nonjudicial foreclosure procedures in which the mortgagee (or more commonly
11704-416: The court, the transaction costs can be quite a bit less. The deed of trust is a conveyance of title made by the borrower to a third party trustee (not the lender) for the purposes of securing a debt. In lien-theory states, it is reinterpreted as merely imposing a lien on the title and not a title transfer, regardless of its terms. It differs from a mortgage in that, in many states, it can be foreclosed by
11858-442: The courts to be an absolute conveyance,..." (assumedly meaning an actual conveyance of "absolute" or "perfect" title to the grantee) "...with the right reserved by the grantor to have the property reconveyed to him upon the payment of the debt or debts intended to be secured agreeably to the terms of the contract,..." (in other words, the grantor retains "equitable title", a.k.a. the equity of redemption , which appears to contradict
12012-472: The debt, the mortgagee proceeds against lot Z (Charlie), then lot Y (Bob). The rationale is that the first purchaser should have more equity and subsequent purchasers receive a diluted share. Mortgages may be legal or equitable. Furthermore, a mortgage may take one of a number of different legal structures, the availability of which will depend on the jurisdiction under which the mortgage is made. Common law jurisdictions have evolved two main forms of mortgage:
12166-410: The debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the real property; this also discourages a strategic foreclosure by a lender who wants to obtain the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at
12320-442: The discretion to decide whether a particular foreclosure should proceed.) A further rationale is that under the principle of freedom of contract , if debtors wish to enjoy the additional protection of the formalities of judicial foreclosure, it is their burden to find a lender willing to provide a loan secured by a traditional conventional mortgage instead of a deed of trust with a power of sale. Courts have also rejected as frivolous
12474-479: The economy spiral even deeper into crisis, both liberal and conservative economists and lawmakers pushed to redirect an economic stimulus bill to what they saw as the core problem: the housing market. But beneath the consensus over helping the housing market, there were huge differences over who should benefit under the competing plans. Democrats wanted to aim money directly at people in the greatest distress; and Republicans wanted to aim money at almost all homebuyers, on
12628-432: The equitable right of redemption and take both legal and equitable title to the property in fee simple . Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue homeowner association dues or assessments. The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing
12782-475: The facts being attested to. It also includes accusations of notary fraud wherein the notaries pre- and/or post-notarize the affidavits and signatures of so-called robo-signers. On October 21, 2010, The Wall Street Journal reported that foreclosure lawyer/advocates Thomas Ice and Matthew Weidner were discussing the deposition testimony of mortgage company employees; Weidner recalled, "Tom and I were talking, and it was, 'Jesus, they're like robots!'" Weidner,
12936-469: The first place —but it continues to be the law in the aforementioned states. Occasionally, borrowers have raised enough cash at the last minute (usually through desperate fire sales of other unencumbered assets) to offer good tender and have thereby preserved their rights to challenge the foreclosure process. Courts have been unsympathetic to attempts by such borrowers to recover fire sale losses from foreclosing lenders. One noteworthy court case questions
13090-439: The foreclosed mortgage (e.g., a senior mortgage, unpaid property taxes, weed/demolition liens). Further legal action, such as an eviction , may be necessary to obtain possession of the premises if the former occupant fails to voluntarily vacate. In some US states, particularly those where only judicial foreclosure is available, the constitutional issue of due process has affected the ability of some lenders to foreclose. In Ohio,
13244-505: The foreclosure litigation. This is accomplished through the filing of a lis pendens as part of the lawsuit and recordation of it in order to provide public notice of the pendency of the foreclosure action. In all U.S. jurisdictions, a lender who conducts a foreclosure sale of real property that has a federal tax lien must give 25 days notice of the sale to the Internal Revenue Service . Failure to give notice results in
13398-508: The foreclosure process sooner than ever. In 2011, banks were on track to repossess over 800,000 homes. In 2010, the highest rates of foreclosure filings were in Las Vegas, Nevada ; Fort Myers, Florida ; Modesto, California ; Scottsdale, Arizona ; Miami, Florida ; and Ontario, California . The geographic diversity of these cities is made up for by the fact they these are all relatively metropolitan areas. Big cities like Houston, Texas saw
13552-436: The foreclosure. A few states impose additional procedural requirements such as having documents stamped by a court clerk; Colorado requires the use of a county "public trustee," a government official, rather than a private trustee specializing in carrying out foreclosures. However, in most states, the only government official involved in a nonjudicial foreclosure is the county recorder, who merely records any pre-sale notices and
13706-560: The foreclosures that occurred in New York City in 2007 involved rental properties. Twenty percent of the foreclosures nationwide were from rental properties. One reason for this is that the majority of these people have borrowed with risky subprime loans. There is a major lack of research done in this area posing problems for three reasons. One, not being able to describe who experiences foreclosure makes it challenging to develop policies and programs that can prevent/reduce this trend for
13860-421: The form of promissory notes and which are known variously as mortgage notes , lender's notes, or real estate lien notes. A mortgage operates to collateralize real property by means of lien or through conditional conveyance of title, depending upon jurisdiction. A mortgage creates a security interest in realty created by a written instrument (traditionally a deed) that either conveys legal title (according to
14014-434: The form of a feoffment , bargain and sale , or lease and release . Since the lender did not necessarily enter into possession, had rights of action, and covenanted a right of reversion on the borrower, the mortgage was a proper collateral security. Thus, a mortgage was on its face an absolute conveyance of a fee simple estate , but was in fact conditional, and would be of no effect if certain conditions were met. The debt
14168-407: The future. Second, researchers cannot tell the extent to which recent foreclosures have reversed the advances in homeownership that some groups, historically lacking equal access, have made. Third, research is focused too much on community-level effects even though it is the individual households that are most strongly affected. Many people cite their own or their family members medical conditions as
14322-497: The information." The Mortgage Electronic Registration Systems, known as MERS, is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. Since the 2010 crisis, 62 million mortgages are held in the name of MERS, and MERS has initiated thousands of foreclosures in the United States, claiming to be the mortgagee of record. Lawyers have contended in court that MERS has no legal right to initiate
14476-450: The legality of the foreclosure practice is sometimes cited as proof of various claims regarding lending. In the case First National Bank of Montgomery v. Jerome Daly , Jerome Daly claimed that the bank did not offer a legal form of consideration because the money loaned to him was created upon signing of the loan contract. The myth reports that Daly won, did not have to repay the loan, and the bank could not repossess his property. In fact,
14630-482: The lender (wadsetter) who on redemption would reconvey the estate to the reverser by a second charter. The difficulty with this arrangement was that the wadsetter was absolute owner of the property and could sell it to a third party or refuse to reconvey it to the reverser, who was also stripped of his principal means of repayment and therefore in a weak position. In later years the practice—especially in Scotland and on
14784-444: The lender before the sale. One tender attempt was held inadequate when the check arrived via FedEx on a Monday, three days after the foreclosure sale had already occurred on Friday. At least one textbook has attacked the paradox inherent in the tender rule—namely, if the borrower actually had enough cash to promptly pay the entire balance, they would have already paid it off and the lender would not be trying to foreclose upon them in
14938-457: The lender chooses not to pursue deficiency judgment—or cannot because the mortgage is non-recourse—and accepts the loss, the borrower may have to pay income taxes on the unrepaid amount if it can be considered "forgiven debt". However, recent changes in tax laws may change the way these amounts are reported. Any liens resulting from other loans against the property being foreclosed ( second mortgages , HELOCs ) are "wiped out" by foreclosure. In
15092-499: The lender is secured by taking possession of all the original title documents of the property and by borrower's signing a Memorandum of Deposit of Title Deed (MODTD). This document is an undertaking by the borrower that he/she has deposited the title documents with the bank with his own wish and will, in order to secure the financing obtained from the bank. Certain transactions are recognized therefore as mortgages by equity, which are not so recognized by common law. In most jurisdictions,
15246-455: The lender may foreclose in a non- or extrajudicial manner if the borrower defaults on the loan. In the United States, more states are lien-theory states than are title-theory or intermediate-theory states. In title-theory states, a mortgage continues to be a conveyance of legal title to secure a debt, while the mortgagor still retains equitable title. In lien-theory states, mortgages and deeds of trust have been redesigned so that they now impose
15400-435: The lender must provide a payoff quote that is estimated 30 days from the date of the letter. This letter is called an FDCPA (Fair Debt Collections Practices Acts) letter and/or Initial Communication Letter. Once the Borrower(s) receives the two letters providing a time period to reinstate or pay off their loan the lender must wait until that time expires in to take further action. When the 10 or 30 days have passed that means that
15554-417: The lender of any transfer, whether; a lease-option, lease-hold of 3 years or more, land contracts, agreement for deed, transfer of title or interest in the property. The vast majority (but not all) of mortgages today have acceleration clauses. The holder of a mortgage without this clause has only two options: either to wait until all of the payments come due or convince a court to compel a sale of some parts of
15708-423: The lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property. Therefore, through the process of foreclosure, the lender seeks to immediately terminate (that is, literally foreclose any future use of)
15862-403: The lender; (2) an indenture or bond (the defeasance ) reciting the loan and providing that if it was repaid the land would reinvest in the borrower, but if not the lender would retain title. If repaid on time, the lender would reinvest title using a reconveyance deed. This was the mortgage by conveyance (aka mortgage in fee ) or, when written, the mortgage by charter and reconveyance and took
16016-456: The lien remaining attached to the real property after the sale. Therefore, it is imperative the lender search local federal tax liens, so that if parties to the foreclosure have a federal tax lien filed against them, the proper notice to the IRS is given. A detailed explanation by the IRS of the federal tax lien process can be found. Because the right of redemption is an equitable right, foreclosure
16170-517: The lienholder from foreclosing and wiping out the mortgage. This type of mortgage is most common in the United States and, since the Law of Property Act 1925 , it has been the usual form of mortgage in England and Wales (it is now the only form for registered interests in land – see above). In Scotland , the mortgage by legal charge is also known as Standard Security. In Pakistan ,
16324-454: The loan. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions mainly in the United States, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions,
16478-440: The mortgage by demise and the mortgage by legal charge. In a mortgage by demise, the mortgagee (the lender) becomes the owner of the mortgaged property until the loan is repaid or other mortgage obligation fulfilled in full, a process known as "redemption". This kind of mortgage takes the form of a conveyance of the property to the creditor, with a condition that the property will be returned on redemption. Mortgages by demise were
16632-535: The mortgage by legal charge is most common way used by banks to secure the financing. It is also known as registered mortgage. After registration of legal charge, the bank's lien is recorded in the land register stating that the property is under mortgage and cannot be sold without obtaining an NOC (No Objection Certificate) from the bank. Equitable mortgages originate in English Common Law and may lack some legal formalities. In an equitable mortgage
16786-472: The mortgage is a non-recourse debt (which is often the case with owner-occupied residential mortgages in the U.S.), lender may not go after borrower's assets to recoup his losses. Lender's ability to pursue deficiency judgment may be restricted by state laws. In California and some other US states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans; however, refinanced loans and home equity lines of credit are not. If
16940-497: The mortgage servicers do the same thing. They have people either on the inside or through outsourcers that we call Robo-signers. They just sign everything in sight, but the legal system requires that they actually know the information." On July 18, 2011, the Associated Press and Reuters released two reports that robo-signing continued to be a major problem in U.S. courtrooms across America. The AP defined robo-signing as
17094-484: The mortgage servicing process. It also covered two companies previously purchased by Ocwen, Litton Loan Servicing LP (“Litton”) and Homeward Residential Holdings LLC (previously known as American Home Mortgage Servicing, Inc. or AHMSI). Ocwen was also required to pay $ 125 million to the nearly 185,000 Ocwen, Litton, and Homeward borrowers who had been foreclosed upon and well as being required to adhere to significant new homeowner protections. Foreclosure Formally,
17248-409: The mortgage to the lender, known as the mortgagee. A mortgage lender is an investor that lends money secured by a mortgage on real estate. In today's world, most lenders sell the loans they write on the secondary mortgage market . When they sell the mortgage, they earn revenue called Service Release Premium . Typically, the purpose of the loan is for the borrower to purchase that same real estate. As
17402-405: The mortgagee may foreclose to recover the outstanding loan. Typically the borrowers will be the individual homeowners, landlords, or businesses who are purchasing their property by way of a loan. Because of the complicated legal exchange, or conveyance , of the property, one or both of the main participants are likely to require legal representation. The agent used for conveyancing varies based on
17556-505: The mortgagee's servicer's attorney, designated agent, or trustee) gives the debtor a notice of default (NOD) and the mortgagee's intent to sell the real property in a form prescribed by state statute ; the NOD in some states must also be recorded against the property. This type of foreclosure is commonly called "statutory" or "nonjudicial" foreclosure, as opposed to "judicial", because the mortgagee does not need to file an actual lawsuit to initiate
17710-417: The mortgagee, the lender has the right to sell the property to pay off the loan if the borrower fails to pay. The mortgage runs with the land, so even if the borrower transfers the property to someone else, the mortgagee still has the right to sell it if the borrower fails to pay off the loan. So that a buyer cannot unwittingly buy property subject to a mortgage, mortgages are registered or recorded against
17864-457: The mortgagor and proceeds against other owners in an 'inverse order' in which they were sold. For example, Alice acquires a 3-acre (12,000 m ) lot by mortgage then splits up the lot into three 1-acre (4,000 m ) lots (X, Y, and Z), and sells lot Y to Bob, and then lot Z to Charlie, retaining lot X for herself. Upon default, the mortgagee proceeds against lot X first, the mortgagor. If foreclosure or repossession of lot X does not fully satisfy
18018-440: The natives would be unable to pay in a reasonable time frame and thus foreclosure would be enforced, and the land acquired by the colonists. When a tract of land is purchased with a mortgage and then split up and sold, the "inverse order of alienation rule" applies to decide parties liable for the unpaid debt. When a mortgaged tract of land is split up and sold, upon default, the mortgagee first forecloses on lands still owned by
18172-418: The need to pay the full value immediately from their own resources. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. Legal systems in different countries, while having some concepts in common, employ different terminology. However, in general, a mortgage of property involves the following parties. The borrower, known as the mortgagor, gives
18326-423: The operation of mortgages, and so provide the key to understanding the differences which exist in the operation of mortgages across jurisdictions. Title theory is "the idea that a mortgage transfers legal title of the mortgaged property from the mortgagor to the mortgagee, which retains it until the mortgage has been satisfied or foreclosed. Only a few American States...have adopted this theory." Under title theory,
18480-568: The original form of mortgage, and continue to be used in many jurisdictions, and in a small minority of states in the United States. Many other common law jurisdictions have either abolished or minimised the use of the mortgage by demise. For example, in England and Wales this type of mortgage is no longer available in relation to registered interests in land, by virtue of section 23 of the Land Registration Act 2002 (though it continues to be available for unregistered interests). In
18634-467: The owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower . The word is a Law French term meaning "dead pledge," originally only referring to the Welsh mortgage ( see below ), but in the later Middle Ages
18788-416: The passing of title under title theory conditional. Mortgages within title theory jurisdictions, then, may be viewed as having the action of what might be called "conditional deeds". Though legal title is passed pursuant to a mortgage therein, the arrangement is generally construed by courts to recognize the mortgagor as "owner" of the mortgaged property within title theory jurisdictions. Even so, foreclosure of
18942-414: The preceding phrase within the same sentence) "...and shall not be held to be a mortgage." (which is true, but only within a "lien theory" jurisdiction). Despite the assertion within the O.C.G.A. of "absolute conveyance", the fact that the grantor of a security deed retains equitable title to the deeded property, means that the conveyance of title effected by said security deed is, in fact, not absolute, but
19096-412: The primary reason for undergoing a foreclosure. Many do not have health insurance and are unable to adequately provide for their medical needs. This again points to the fact that foreclosures affects already vulnerable populations. Credit scores are greatly impacted after a foreclosure. The average number of points reduced when you are 30 days late on your mortgage payment is 40 – 110 points, 90 days late
19250-439: The principal of his or her primary mortgage is above 80% of the value of his or her property. In most situations, insurance requirements guarantee that the lender gets back some pre-defined proportion of the loan value, either from foreclosure auction proceeds or from PMI or a combination of those. Nevertheless, in an illiquid real estate market or if real estate prices drop, the property being foreclosed could be sold for less than
19404-417: The property as a remedy for default under title theory is most often extrajudicial (non-judicial). Lien theory is "the idea that a mortgage resembles a lien, so that...", pursuant to a mortgage, "...the mortgagee acquires only a lien on the property and the mortgagor retains both legal and equitable title unless a valid foreclosure occurs. Most American states...have adopted this theory." Sometimes this theory
19558-506: The property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the lender must sue the defaulting borrower in state court. Upon final judgment (usually summary judgment ) in the lender's favor, the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure to protect any equity
19712-724: The property in lieu of the past due payments. Alternatively, the court may order the property sold subject to the mortgage, with the proceeds from the sale going to the payments owed the mortgage holder. The process of foreclosure can be rapid or lengthy and varies from state to state. Other options such as refinancing , a short sale, alternate financing, temporary arrangements with the lender, or even bankruptcy may present homeowners with ways to avoid foreclosure. Websites which can connect individual borrowers and homeowners to lenders are increasingly offered as mechanisms to bypass traditional lenders while meeting payment obligations for mortgage providers. Although there are slight differences between
19866-474: The property is less than the debt (" under water "). Historically, strict foreclosure was the original method of foreclosure. Acceleration is a clause that is usually found in Sections 16, 17, or 18 of a typical mortgage in the US. Not all accelerations are the same for each mortgage, as it depends on the terms and conditions between lender and obligated mortgagor(s). When a term in the mortgage has been broken,
20020-467: The recent trends: “Foreclosure floodwaters receded somewhat in 2010 in the nation’s hardest-hit housing markets. Even so, foreclosure levels remained five to 10 times higher than historic norms in most of those hard-hit markets, where deep fault-lines of risk remain and could potentially trigger more waves of foreclosure activity in 2011 and beyond.” As per the foreclosure data report of RealtyTrac for January 2014, 1 in every 1,058 homes in U.S. received
20174-497: The remaining balance on the primary mortgage loan, and there may be no insurance to cover the loss. In this case, the court overseeing the foreclosure process may enter a deficiency judgment against the mortgagor. Deficiency judgments can be used to place a lien on the borrower's other property that obligates the mortgagor to repay the difference. It gives lender a legal right to collect the remainder of debt out of mortgagor's other assets (if any). There are exceptions to this rule. If
20328-539: The remaining mortgage balance is higher than the actual home value, the foreclosing party is unlikely to attract auction bids at this price level. A house that has gone through a foreclosure auction and failed to attract any acceptable bids may remain the property of the owner of the mortgage. That inventory is called REO (real estate owned). In these situations, the owner/servicer tries to sell it through standard real estate channels. The mortgagor may be required to pay for Private Mortgage Insurance , or PMI, for as long as
20482-515: The right to take possession, would be protected. In the United States, those states that have reformed the nature of mortgages in this way are known as lien states. A similar effect was achieved in England and Wales by the Law of Property Act 1925 , which abolished mortgages by the conveyance of a fee simple. Since the 17th century, lenders have not been allowed to carry interest in the property beyond
20636-543: The sale and executes the legal papers and deed if any. This may be done by a superior court judge or a referee specially appointed by a court of judicial privacy. Foreclosure by power of sale, also called nonjudicial foreclosure , and is authorized by many states if a power of sale clause is included in the mortgage or if a deed of trust with such a clause was used, instead of an actual mortgage. In some US states, like California and Texas , nearly all so-called mortgages are actually deeds of trust. This process involves
20790-510: The sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the real property in return. Historically, the vast majority of judicial foreclosures have been unopposed, since most defaulting borrowers have no money to hire counsel. Therefore, the U.S. financial services industry has lobbied since the mid-19th century for faster foreclosure procedures that would not clog up state courts with uncontested cases, and would lower
20944-448: The sale of the property by the mortgage holder without court supervision (as elaborated upon below). This process is generally much faster and cheaper than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale. Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure , which
21098-412: The securement of loans, which instruments usually take the form of trust deeds or, within the State of Georgia, the security deed. Deeds always act to convey legal title to a parcel of real property, and the ubiquitous usage of such deeds within lien theory jurisdictions has generally served to subvert the action of mortgages therein. Under what has come to be called the "intermediate theory" of mortgages,
21252-588: The servicing standards set up by the 2012 National Mortgage Settlement (NMS) with the five largest banks. The Consumer Financial Protection Bureau (CFPB), together with attorneys general and state banking regulators in 49 states, and the District of Columbia obtained a Consent Judgment requiring Ocwen Financial Corporation—who at the time, was the largest nonbank mortgage loan servicer in the country—and its subsidiary, Ocwen Loan Servicing, to provide $ 2 billion in first lien principal reduction to underwater borrowers. The consent order addressed Ocwen's misconduct during
21406-471: The states, the foreclosure process generally follows a timeline beginning with initial missed payments, moving to a sale being scheduled and finally a redemption period (if available). In the United States , there are two types of foreclosure in most states described by common law . Using a " deed in lieu of foreclosure ," or " strict foreclosure ", the noteholder claims the title and possession of
21560-416: The tasks prescribed by statute in an attempt to give notice. "Strict foreclosure" available in some states is an equitable right of the foreclosure sale purchaser. The purchaser must petition a court for a decree that cancels any junior lien holder's rights to the senior debt. If the junior lien holder fails to object within the judicially established time frame, his lien is canceled and the purchaser's title
21714-505: The theory that a rising tide would eventually lift all boats. In 2010, there was a 14% increase in the number of homes receiving a default notice between July and September. In that year one in every 45 homes received a foreclosure filing and the problem has become more widespread with the increasing rates of unemployment across the nation. Banks have become extremely aggressive without much patience for those who have fallen behind on their mortgage payments, and there are more families entering
21868-469: The timing of its passage “suspicious.” Brunner organized opposition to the bill, urging citizens to call and email the President and tell him not to sign the act. CNBC senior editor John Carney called the bill “mysterious” and wrote that the bill “might bail out banks such as GMAC, JP Morgan Chase and Bank of America from their foreclosure gate troubles.” Aderholt defended his bill in a statement: “There
22022-428: The title with a government office, as a public record. The borrower has the right to have the mortgage discharged from the title once the debt is paid. A mortgagor is the borrower in a mortgage—he or she owes the obligation secured by the mortgage. Generally, the borrower must meet the conditions of the underlying loan or other obligation in order to redeem the mortgage. If the borrower fails to meet these conditions,
22176-399: The underlying debt under the equity of redemption principle. Attempts by the lender to carry an equity interest in the property in a manner similar to convertible bonds through contract have been therefore struck down by courts as "clogs", but developments in the 1980s and 1990s have led to less rigid enforcement of this principle, particularly due to interest among theorists in returning to
22330-480: The validity of the debt in a claim against the bank to stop the foreclosure and sue for damages. In a foreclosure proceeding, the lender also bears the burden of proving they have standing to foreclose. Several U.S. states, including California, Georgia, and Texas impose a "tender" condition precedent upon borrowers seeking to challenge a wrongful foreclosure, which is rooted in the maxim of equity principle that "he who seeks equity must first do equity", as well as
22484-417: The wake of the United States housing bubble and the subsequent subprime mortgage crisis there has been increased interest in renegotiation or modification of the mortgage loans rather than foreclosure, and some commentators have speculated that the crisis was exacerbated by the "unwillingness of lenders to renegotiate mortgages". Several policies, including the U.S. Treasury sponsored Hope Now initiative and
22638-472: Was absolute in form, and unlike a gage was not conditionally dependent on its repayment solely from raising and selling crops or livestock or simply giving the crops and livestock raised on the gaged land. The mortgage debt remained in effect whether or not the land could successfully produce enough income to repay the debt. In theory, a mortgage required no further steps to be taken by the lender, such as acceptance of crops and livestock in repayment. However, if
22792-522: Was announced that the five largest mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) agreed to a historic settlement with the federal government and 49 states. The settlement, known as the National Mortgage Settlement (NMS), required the servicers to provide about $ 26 billion in relief to distressed homeowners and in direct payments to the states and federal government. This settlement amount makes
22946-407: Was apparently common in the mortgage industry. In the weeks following the robo-signing revelation, other large banks came under fire for employing robo-signers as well, including JPMorgan Chase and Bank of America . In the fall of 2010, major U.S. lenders such as JP Morgan Chase, Ally Financial (formerly known as GMAC), and Bank of America suspended judicial and non-judicial foreclosures across
23100-484: Was applied to all gages and reinterpreted by folk etymology to mean that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure . In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than on other property (such as ships) and in some jurisdictions only land may be mortgaged. A mortgage is the standard method by which individuals and businesses can purchase real estate without
23254-454: Was limited to a term of years and contained a forfeiture proviso ( pactum commissorium ) providing that if after the term the debt was not repaid, title was forfeited to the lender, i.e., the term of years would expand automatically into a fee simple. This is known as a shifting fee and was sufficient after 1199 to entitle the gagee to bring an action for recovery. However, the royal courts increasingly did not respect shifting fees since there
23408-416: Was no livery of seisin (i.e., no formal conveyance), nor did they recognize that tenure could be enlarged, so by the 14th century the simple gage for years was invalid in England (and Scotland and the near continent ). The solution was to merge the latter-day wadset and gage for years into a single transaction embodied in two instruments: (1) the absolute conveyance (the charter ) in fee or for years to
23562-442: Was no significant difference in household size between the post-foreclosure and control groups. However, only 17% of the post-foreclosure individuals had the same number and composition of household members after a foreclosure than before. By comparison, the control group maintained the same household companions in 46% of cases; and, 5) Only about 20% of post-foreclosure individuals chose to live in households where one person maintained
23716-411: Was unattractive for lenders because the gagor could easily eject the gagee using novel disseisin , and the gagee—merely seized ut de vadio “as of gage”—could not bring a freeholder's remedies to recover possession. Thus, the unprofitable living gage fell out of use, but the dead gage continued as the Welsh mortgage until abolished in 1922. By the 13th century—in England and on the continent—the gage
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