Foreclosure Process: Definition and Ownership
Perhaps the first question that comes to mind when thinking of the foreclosure process is what is that process and how is it beneficial or harmful to anyone. First, by definition, foreclosure implies a home that is owned by a bank. Although the home belongs to the bank, it was once owned by an individual who either abandoned the home or voluntarily deeded the home to the bank. Commonly, people are used to hearing that banks take back property, but the reality is that the bank never owned the property in the first place. In this sense, it would be a paradox to argue that the bank repossessed a property that it did not own in the first place. The bank foreclosed the property or trust and seizes the home, thereby making it its own property.
Voluntary Foreclosure and the Process
Foreclosure is achieved through different means or as a result of some reason in the process contract between the homeowner and the bank. Some people, however, opt to go into foreclosure voluntarily. The process entails some simple but essential steps.
Firstly, a person intends to own a home or wishes to take a loan from the bank and uses his home as the collateral. The bank provides its terms of providing the borrower with the required money, who then agrees to the conditions. A contract is formed between the two, that is, the bank and the borrower. However, the borrower fails to meet the terms following unpredictable or unavoidable reasons such as being laid-off, fired or quitting a job, he or she is unable to continue working due to medical conditions, the person accrues excessive debts, there is a squabble with the co-owner, he or she is transferred to another state, or the person can no longer afford to maintain the home or the debt. As a result, the bank is unable to get back its money as it was initially agreed upon between the borrower and the bank. The bank results in taking the home to sell it to another buyer to get back its money. The mortgage defaulter then loses his or her home to the bank, which lists it as a foreclosure to sell to other people. Gerardi, Lambie-Hanson, & Willen (2013) notes that between 1987 and 1991, a total of 2612 residential mortgages across the United States were resolved through the foreclosure process. Evidently, it is a serious issue that results in those intending to buy homes through a mortgage should consider.
Foreclosure Process in Texas
The city of Texas is lender friendly when compared to the majority of other states. In this State, the non-judicial foreclosure has for over a century now permitted lenders considerable ease in recovering mortgage and fixing deficiency liabilities of the borrower (Gover & West, 1989). The statutorily mandated procedures are efficient and straightforward, and no specified one-action limits the range of remedies available to the lender or that dictate the price at a non-judicial sale. Despite the presence of non-judicial foreclosure, a judicial foreclosure process is available. In the Texas judicial foreclosure, when one takes a loan to purchase a residential property, he or she signs a promissory note and a deed of trust. The promissory note is primarily a promise that a person makes to repay the loan offered by a bank. The deed of trust then acts as security for the loan that is evidenced by a promissory note.
Judicial Foreclosure Process in Texas
The basics of judicial foreclosure entail filing a petition in a District Court where the case is heard. The pleading requires the person loaned by the bank to have accrued debt and has failed to repay the debt. As a result, the bank forecloses the mortgage and lists it as one of its properties to sell to regain its money back that it had loaned the person. The District Court makes judgment upon hearing the case as presented by either the lien or the bank. The Writ and sale are issued by the court if a person is found to have failed to repay the loan as per the agreement. The post-sale matters include the home equity and reverse mortgage foreclosure which allows the owner of the home to reverse the decision of the bank if he or she can repay the bank all the loan and the interests accrued.
Non-judicial Foreclosure Process and Alternative Options
Alternatively, a person can opt to use the non-judicial foreclosure process that entails the determination of the reasonable equivalent value. The process is much more comfortable and cheaper both to the bank and the person loaned. A person can also use other mortgage lenders who are interested in providing a stepping stone for people to own homes and avoid foreclosure. Those groups provide further loans that help the person repay the bank and then pay them at an agreed rate. The government is particularly involved in such processes that involve bailing out people as long as they show determination to repay the loan.
References
Gerardi, K., Lambie-Hanson, L., & Willen, P. S. (2013). Do borrower rights improve borrower outcomes? Evidence from the foreclosure process. Journal of Urban Economics, 73(1), 1-17.
Gover, A. S., & West, G. D. (1989). The Texas Nonjudicial Foreclosure Process-A Proposal to Reconcile the Procedures Mandated by State Law with the Fraudulent Conveyance Principles of the Bankruptcy Code. Sw. lj, 43, 1061.
