Who Can Foreclose on a Homeowner?

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    Mortgage Company

    • The laws relating to foreclosure vary from state to state but generally a mortgage company can foreclose if a borrower has fallen more than 90 days behind on mortgage payments. Prior to foreclosing, the mortgage company attempts to contact the delinquent borrower to collect the payment, but if the borrower fails to pay the amount due, the lender issues a 30-day demand letter. If the borrower does not make payment of the amount specified in the demand letter within 30 days, the lender can file a motion at the local courthouse to foreclose on the home. After the foreclosure hearing, the lender's attorney sets a sale date and the proceeds from the sale are used to settle the debt.

    Home Equity Lenders

    • Home equity lines of credit and home equity loans are types of mortgages. When a home equity loan closes, the lender places a lien on the home. If a borrower fails to make payments, the home equity lender can follow the same steps as a primary mortgage holder to foreclose on the home. Proceeds from the foreclosure sale are used to settle both the first mortgage and the home equity loan. If the sale does not generate enough money to cover both debts, the home equity lender, in the second lien position, will take a loss.

    Homeowners Association

    • Homeowners who belong to a homeowners association, HOA, often have to pay monthly or annual dues. If a homeowner fails to pay the members dues or any other fees assessed by the HOA, the HOA can foreclose on their home. State laws vary, but in some states HOAs can foreclose within 30 days of a member missing a payment. Many states allow HOAs to conduct non-judicial foreclosures, which involve a transfer of title from the homeowner to the HOA without even having a court hearing.

    Other Lien Holders

    • People and companies owed money by homeowners can file a court petition to have a lien placed on the debtor's home. A judge must first decide whether the debt warrants a lien being placed, but if the judge does allow the creditor to place a lien, the creditor can foreclose on the home to collect on the debt. Credit card companies sometimes place liens on homes. Foreclosures are unusual because if a credit card company forecloses, sale proceeds are first used to payoff mortgage lien holders and the credit card company or other creditors only get paid if any funds remain.

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