Power to Keep Your Home

by Dustin Dugan

FIN 180

Over the past few years the United States economy has been down to lows that it has not seen in quite some time.  These lows have been causing a lot of families and individuals to lose their homes. This is because they just do not have to money to pay their mortgages like they used to. One word that has seemingly come up everywhere is foreclosure.  A foreclosure is the process where the estate or property formally given to the buyer or mortgagor becomes the property of the lender or mortgagee due to the fact of the mortgagor fails to keep up on their payments.  Although most people may know why foreclosures take place, exactly why they are allowed to take place is not such common knowledge. Each state has the ability to choose whether they want to be a lien theory state or a title lien state although the state does not have to fallow one exactly. Often times states have very complicated and mix theory’s.

Lien theory states look at a mortgage as a lien on real estate, with the mortgagor holding the legal title to the property. If and when the mortgager defaults on the mortgage the mortgagee then has the right to the process know as foreclosure and take the property.

Title theory states recognize the mortgagee as the legal titleholder of the property for the duration of the loan. Since they are the legal owner they have the right to take property if the mortgagor defaults on the mortgage. Once the mortgage is paid in full the mortgagor received the equitable title to the property making them the legal owner.

In California there is a specific process that foreclosures fallow, but does not exclusively fallow either title theory or lien theory. The first step in the California foreclosure process is the mortgagor not paying their mortgage. Once this happens the mortgagee will give the mortgagor a Notice of Default. As soon as this happens the mortgagor will have 90 days to respond by getting the account current and catching up on all past due payments. If the mortgagor does not get the account current foreclosure then sets in and the mortgagee send the mortgagor a Notice of Sale. This informs the mortgagor that they plan to sale the property because of mortgage default.  Once the "Notice of Sale" is received the mortgagee is able to foreclose on and sell the home within 21 days.

The foreclosure process in California is very complex. This is actually favorable for mortgagor. If a mortgagee fails to follow all procedures exactly as they are stated, the foreclosure process must start over again. This make the foreclosure process take anywhere from 4-5 months to 2 years. Fortunately for homeowners, a few new laws were enacted in California to make it easier for homeowners to avoid foreclosure.  This makes it very important for people to understand the laws and reasons behind foreclose in any state you may live. Knowledge is power and sometime is cases like this the power to keep your home. 

Work Cited

Day, Nellie. "How Does Foreclosure Work in California?" EHow. Demand Media, 12 Dec. 2008. Web. 10 Apr. 2012. <http://www.ehow.com/how-does_4673111_foreclosure-work-california.html>.

Diaz, Julian, and J. Andrew. Hansz. Real Estate Analysis: Environments and Activities. Dubuque, IA: Kendall Hunt Pub., 2010. Print.

"What Is Foreclosure?" - Learn about Foreclosure in the U.S. Web. 9 Apr. 2012. <http://www.foreclosureuniversity.com/studycenter/freereports/what_is_foreclosure.php>.