Chapter 23 KEEPING THE WOLF FROM THE DOOR Flashcards
What is the goal of this chapter?
To quell apprehension about foreclosure and provide strategies to avoid it or deal with it if necessary.
The chapter aims to inform readers about the foreclosure process and their rights.
What is foreclosure?
The legal process initiated by a mortgagee or lien creditor to gain title to property owned by the mortgagor.
Foreclosure seeks to defeat the mortgagor’s interest so the mortgagee can acquire the property without interference.
What must occur before foreclosure can take place?
There must be a default in the mortgage.
Default occurs when the mortgagor fails to make required mortgage payments.
What is a grace period in the context of mortgages?
A length of time after the payment due date during which the mortgagee allows the mortgage to enter a period where default has not yet occurred.
Grace periods typically last 10 to 15 days.
What rights do mortgagors generally have under foreclosure laws?
Mortgagors cannot be deprived of interest or equity redemption without due process of law.
This protects the mortgagor’s rights more than commonly believed.
What happens when a mortgagee accelerates payments?
The lender calls for a full and complete repayment of the amounts due.
This usually occurs after a breach of contract by the mortgagor.
What are the four periods of foreclosure according to lenders?
- The collection period
- The preforeclosure period
- The foreclosure
- The postforeclosure period
These stages help lenders manage the foreclosure process systematically.
What is the first step in the collection period?
Check if the payment arrived on time; if not, make note to follow up within three days.
This is part of the lender’s process to manage late payments.
What occurs during the preforeclosure period?
- Notice sent to collection department
- Letter sent to borrower for a conference
- Review of loan and property status
This period is critical for discussing alternatives to foreclosure.
What does the foreclosure period involve?
- Appraisal of the property
- Preparation of loan status and costs
- Review by the foreclosure panel
This stage culminates in the sale of the property.
What happens in the postforeclosure period?
- Processing of funds if sold
- Change in ownership documentation
- Marketing of the property
This stage ensures proper handling after the foreclosure sale.
True or False: Lenders prefer to avoid foreclosure.
True.
Foreclosure is costly and time-consuming for lenders, often leading to a loss in property value.
What are some reasons lenders try to avoid foreclosure?
- Costly and burdensome process
- Potential loss of property value
- Desire to maintain good relationships with borrowers
Lenders often seek alternatives to foreclosure to protect their investments.
Fill in the blank: Foreclosure is not the only remedy available to mortgagees to collect on unpaid mortgages; they can also _____.
sue in a court of law on the debt (the note)
This allows lenders to seek judgments against the mortgagor’s property.
How do courts typically view deficiency judgments against borrowers?
Courts may not look favorably on deficiency judgments against borrowers on primary loans.
The situation can vary significantly by state.
What is a common lender response when a property appears unoccupied after payment is overdue?
An inspection is ordered to determine if the property has been vacated or if there are other problems.
This is part of the lender’s due diligence during the collection period.
What should a borrower understand about lender expectations?
Lenders expect the funds to be repaid regardless of personal liability on the note or mortgage.
This expectation remains even if the mortgage lacks personal guarantees.
What is the main goal of the lender during the foreclosure process?
To recover the debt owed and mitigate losses.
Lenders aim to ensure they collect as much as possible from the foreclosure sale.
What is the primary reason lenders avoid foreclosure?
The foreclosure process is often long and burdensome, leading to potential loss in property value.
The foreclosure process can take years, during which property values may decline.
What can a mortgagor do during the preforeclosure period?
The mortgagor can attempt to work out a settlement or payment plan while delaying foreclosure.
This period allows the mortgagor to potentially milk the property for income.
What type of properties are most vulnerable to ‘milking’?
Seasonal properties are most vulnerable to ‘milking’.
Examples include hotels and recreational facilities that depend on specific operational times.
What is a common legal strategy that can delay foreclosure?
Claiming that the mortgage interest is usurious or that other aspects of the loan are onerous.
Such claims can lead to court proceedings, delaying the foreclosure process.
What is often thought to be immune to mortgagor control?
Vacant land is often thought to be immune.
However, vacant land can still be affected by zoning changes that impact its value.
What happens when a mortgage goes into default regarding lease assignments?
The mortgagee can step in and collect rents from tenants while the foreclosure is proceeding.
The owner retains physical control but loses control over income.
