All You need to Know about Foreclosures in Real Estate
May 17, 2018 Real Estate News
Foreclosure refers to a procedure that happens when a borrower fails to repay the loan on time, due to which lenders (banks and financial institutions) declares the borrower as a defaulter. if the borrower fails to repay the loan for a long period of time then the lender tries to sell the respective property and recover the losses that have been done by the borrower.
But the norms related to foreclosure are not very clear in the country. Foreclosure will happen if the loan account of an individual with the bank becomes a non performing asset. An account usually becomes a non performing asset when the individual defaults on paying instalments for six months. If such situation happens then the financial institution under ‘Recovery of debts due to banks and financial institutions Act, 1993’ starts summary proceeding against the borrower to recover their dues.
In case of mortgages, foreclosures are governed by the Transfer of Property Act. The process of foreclosure begins with a borrower or the owner defaults on loan payments and the lender files a Notice of Default or 'Lis Pendens' which is a public default notice. After a specific period of time and with the announcement from the court, the financial institution can auction the property.
However, the 'National Housing Bank (Amendment) Act, 2000′ makes the foreclosure process a little clearer. The buyer might also get entitled to a loan modification based on the change in financial situation. Loan modification refers to a change in the terms of a current loan, that could vary from a reduction in interest rate reduction to the principal amount.
Furthermore, buyers or the consumers need to be aware of their legal rights in case of the forthcoming foreclosure process. Such as the consumers need to know that all debtors or borrowers have rights under the Fair Debt Collection Practices Act (also known as the Consumer Credit Protection Act) in order to avoid or stop abusive, repetitive and unfair debt collection practices. The borrowers should be aware that the creditors can only call them at certain hours, and they should identify the name of the actual investor along with other things.
But the norms related to foreclosure are not very clear in the country. Foreclosure will happen if the loan account of an individual with the bank becomes a non performing asset. An account usually becomes a non performing asset when the individual defaults on paying instalments for six months. If such situation happens then the financial institution under ‘Recovery of debts due to banks and financial institutions Act, 1993’ starts summary proceeding against the borrower to recover their dues.
In case of mortgages, foreclosures are governed by the Transfer of Property Act. The process of foreclosure begins with a borrower or the owner defaults on loan payments and the lender files a Notice of Default or 'Lis Pendens' which is a public default notice. After a specific period of time and with the announcement from the court, the financial institution can auction the property.
However, the 'National Housing Bank (Amendment) Act, 2000′ makes the foreclosure process a little clearer. The buyer might also get entitled to a loan modification based on the change in financial situation. Loan modification refers to a change in the terms of a current loan, that could vary from a reduction in interest rate reduction to the principal amount.
Furthermore, buyers or the consumers need to be aware of their legal rights in case of the forthcoming foreclosure process. Such as the consumers need to know that all debtors or borrowers have rights under the Fair Debt Collection Practices Act (also known as the Consumer Credit Protection Act) in order to avoid or stop abusive, repetitive and unfair debt collection practices. The borrowers should be aware that the creditors can only call them at certain hours, and they should identify the name of the actual investor along with other things.
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