Ch 13 loan defaults and foreclosures

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Ch 13 loan defaults and foreclosures

  1. 1. Loan Defaults and ForeclosuresChapter 131
  2. 2. Defaults• Breach of one or more of the conditions or terms of a loan agreement• Acceleration clause activated• Lenders seek to avoid foreclosure• Acceleration and foreclosure as last resort2
  3. 3. Delinquencies• Principal and interest • Grace period • Late period charge• Property taxes• Other liens• Hazard insurance• Poor property management3
  4. 4. Adjustments• Workouts• The Soldiers and Sailors Civil Relief Act of 1940• The Housing Act of 1964• Avoiding a foreclosure• Moratoriums (forbearance) and recasting• Voluntary conveyance of deed4
  5. 5. Foreclosures• Process to recover lender’s collateral— borrower’s rights of redemption are eliminated and all interests in the subject are removed – Equitable redemption period – Strict forfeiture – Statutory redemption period5
  6. 6. Power-of-Sale Foreclosures• Deeds of trust – Beneficiary notices payment delinquencies; borrowers are unable to remedy – Beneficiary notifies trustee to foreclose – Trustee files Notice of Default – Reinstatement period – Notice of trustee’s sale and publication of date, time, and place of sale – Sale is held and highest cash bidder wins – Trustee’s deed is given to successful bidder 6
  7. 7. Judicial Foreclosure and Sale• Conventional mortgages – Lender notifies delinquent mortgagor – If no solution, complaint is filed by mortgagee in county court – Title search made; lis pendens filed – Complaint brought before presiding judge – Judgment decree – Public sale• Conventional guaranteed mortgages• Equitable redemption• Statutory redemption7
  8. 8. Loans with Special Foreclosure Requirements• FHA-insured loans• DVA-guaranteed loans• Junior loans8

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