CHAPTER 2 What is Foreclosure?
So, what exactly is foreclosure, and how do good people find themselves stuck in the foreclosure process? As part of the loan agreement, you agree that the house you’re buying will serve as collateral for the loan. This means that if you stop making payments, the lender can take possession of the home and sell it in order to recover the money they loaned you. If you’re a few days late on a mortgage payment, there is no reason to panic. The bank is not going to take away your house for this. Most mortgage contracts will give you a 15-day grace period and will add a 5% late fee on payments made after that grace period. Chances are, you only get into trouble if you’re more than 90 days late. Note: Please check with your bank or mortgage lender to find the exact terms and conditions. At this point, the bank will issue a “Notice of Default” with the County Recorder’s Office. A letter will be mailed to you, notifying you that you’ve defaulted on your loan. You’ll be given 90 days to pay off the debt. Your house is now at what is called the pre- foreclosure stage. This means that the bank hasn’t taken possession of your house yet. If you fail to pay off your loan after the notice, your property officially enters foreclosure and your bank will take possession of the property. They then sell it to recoup their money.
This process can take a while. For example, in New Jersey, the
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