Real estate acquiring is greatly dependent on funding from investors. In the case where one is unable to repay the loan offered, the property can be sold off as repayment of the debt. In the case where the sale off has to be first authorized by the court system, this is referred to as a judicial foreclosure. The foreclosure type varies from state to state, with some state laws calling for judicial foreclosures while others allow non-judicial foreclosures. This article addresses judicial foreclosure in the State of Missouri. Foreclosure asks for court intervention when the lender has no deed of trust power of sale, which is the case in most mortgage-backed securities. In Missouri, judicial foreclosure follows the legal systems that involve several processes and alternative processes to avoid foreclosure; all this discussed out in this article.
In the judicial foreclosure process, the aim to pay the debt owed to the first lender through the sale of the property. Then, the other consecutive lenders owed by the property owner, if any, and finally, what remains will proceed to the property owner. According to (Bhutta, 2010), in this type of foreclosure, after the property owners default repayment, the lender notifies the property owner of intentions to file for judicial foreclosure. The lender then goes ahead to file a lawsuit against the property owner, demanding the remaining balance. After a hearing is done in court and some exchange pleas are made, a court decision is finally reached. Judicial foreclosure sessions usually take a short time. After the decision is made and the court calls for foreclosure, a trustee is selected by the court to oversee the sale-off process, mostly a judicial officer or another law practitioner trusted by the court. This trustee ensures that the court orders are followed and parties involved in the sale-off benefit as per the court orders.
Mortgage loan repayment can sometimes be a significant burden to the property owners. Defaulting repayment is the primary influence behind foreclosure undertakings. However, the property owner has alternatives that they can take to avoid foreclosure. This acts as a mitigation measure behind avoiding foreclosure, but depending on the chosen option, there may associated effects coming along. Before any alternative is selected, a property owner should seek advice from a legal practitioner in the real estate sector (Agarwal, 2012). The first alternative is mortgage modification by the lender, requested by the property owner. Loan modification terms are usually considered mostly if the loan repayment is made before it already exceeds the value of the property. In this case, the property owner may plead for loan modification and be considered by the lender. This may damage your credit, but it is better than facing foreclosure, considering that foreclosure already has damage on your credit as the property owner. Loan modification depending on the lender, will mostly lead to lower payments to the lender. On lender consultation, the lender may also refer the property owner to a government refinance program. An example of such is the Home Affordable Refinance Program (HARP) offered by the U.S government, which is a program that helps property owners refinance their loans.
Another available option available to the property owner is the short sales. If the amount owed to the lender is less than the actual value of the home, it is said to be underwater. In this case, the property owner goes to the lender to request a short sale. A short sale involves the property owner getting the rights to sell the home as a way of getting to clear the debt owed to the lender but less of what is actually owed to this lender. In most cases, the lenders agree to short sales since the expenses involved with judicial foreclosures can sometimes be a bit overwhelming (Gerardi, 2013). Short sales are also more straightforward as compared to foreclosures since they only involve the lender and property owner. A significant benefit of short sales to property owners is that the credit report is protected in such scenarios, considering future scenarios that may call for loan acquisition. Also, in the case where one wants to avoid foreclosure, gathering of available assets can be helpful. Most of the times when people suffer foreclosure they do not think of assets that they have, a majority want to only source for external support when help can come from within. Assets such as insurance policy balance, unrequired personal property, bonds, stock, and savings can be very helpful in the mortgage loan reduction. Tapping these assets into mortgage loan repayment will unleash the potential at hand to settle the debt.
Another way of avoiding foreclosures is by filing for bankruptcy in a court of law. This will entail relief from unsecured loans, thus helping the property owners to divert their available financial resources towards mortgage loan repayment entirely. In a case where the property owner had many unsecured loans under repayment, this will act as a relief that may save them from foreclosure. Unlike tapping of assets into mortgage repayment, filing for bankruptcy will ensure that the assets available can be protected (Gerardi, 2013). One should also consider seeking for advice from an unbiased source, and here bankruptcy affiliated firms are advocated against. This is because these firms may also want to use it to their business advantage and lead you into making the wrong decision.
Finally, with all these alternatives available to the property owners, seeking for an advice on the best alternative to go for is essential. For this, counselling firms are available to help people at risk of losing their homes to foreclosure. With most of them being nonprofit organizations, this makes it favorable to the current conditions of property owners who fear facing foreclosure. Through the U.S department of housing and urban development (HUD), one can easily locate a counsellor nearby or visit their website on www.hud.gov and find home counsellors under the resource tab (Guiso, 2013). Foreclosure is tough to property owners, but with these alternatives available and counsellors to help through; property owners should find it a more manageable situation and no one should run away from the foreclosure reality.
References:
Agarwal, S., Amromin, G., Ben-David, I., Chomsisengphet, S., Piskorski, T., & Seru, A. (2012).
Policy intervention in debt renegotiation: Evidence from the home affordable modification program. Journal of Political Economy, 125(3), 654-712.
Bhutta, N., Dokko, J., & Shan, H. (2010). The depth of negative equity and mortgage default
decisions. Federal Reserve Board FEDS Working Paper, No. 2010–35.
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.
Guiso, L., Sapienza, P., & Zingales, L. (2013). The determinants of attitudes toward strategic
default on mortgages. The Journal of Finance, 68(4), 1473–1515.
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