What is home repossession?
The first question you might be asking yourself is what home repossession is. To put it in simple terms, when someone gets a mortgage, they are placing their home as collateral against the loan itself. If the borrower does not make good on the payments toward their loan, then they will have their property taken away from them. This means that when you default on your payments, they will take your home away from you. This is something that unfortunately many people have faced in the past, and are currently facing now.
What Are the Different Types of Repossession?
There are two different types of home repossession; judicial and non-judicial. The main difference between the two kinds is that one is overseen by the court system (judicial) while the other is not (non-judicial). In both cases, you would be notified, evicted, and the house would be sold at a public auction to the highest bidder.
The length of time that it takes for a home repossession to occur varies from state to state. One factor that goes into play is whether or not the mortgage lender and the homeowner are currently in any negotiations to try and stop the repossession of the home.
Do The Laws Change For Different States?
Depending on the state that you live in, there are different laws that govern how homes are purchased. If you reside in a state that issues a lien-of-trust when you buy your home, then they are able to pursue a non-judicial type of home repossession against you. This can be a lot easier to handle since you won’t have to get the courts involved. This process is sometimes called a “trustee sale”. If you live in a state that requires lenders to issue a mortgage, then they are not able to circumvent this process and must get the courts involved when they are trying to repossess your home.
Before any action can be taken, first a notice of default must be issued. Issuing a notice of default is usually done after the fourth missed payment on your loan. From there the process timeline depends on the laws of the state that you live in. Usually, you will be given 2 to 3 months to get caught up on your loans and stop the home repossession process if possible.
What Can You Do to Prevent A Home Repo?
There are steps that you can take with your lender to try and get things settled before your property is repossessed. There is the option of a short-sale, which is when the house is sold, and the lender agrees to list the debt as “paid in full.” This is not a guaranteed option as the house must be listed for at least two months and the lender must sign off on the sale. If they don’t the homeowner could request a deed-in-lieu, and the house would be voluntarily given back to the lender to prevent a repossession.
All in all, no one wants their property to be repossessed. Depending on the state you live in this can hold true to being a lengthy process. It is always a stressful situation to deal with and can leave you feeling hopeless and lost as to what your future holds. Be aware of the simple mistakes new homeowners make.