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Obsolete Laws Worsen Foreclosures by State



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By : John Cutts    99 or more times read
Obsolete foreclosure laws have been aggravating foreclosures by state, according to the National Consumer Law Center (NCLC). Foreclosure laws or the lack of homeowner protection laws have been protecting other parties, such as lenders and renters, much more than homeowners.

One of these obsolete laws is the fast-track foreclosure law, which give mortgage lenders the right to force out defaulting homeowners of their homes and then sell the homes immediately through auctions even without filing foreclosure notices with the courts. The homeowners have the right to question the lenders’ actions, but lack funds to pursue their claims. This law is in effect in 30 U.S. states and in the District of Columbia, hastening the rise in foreclosures by state.

Another is the lack of law giving borrowers the right to notification of foreclosure. In the District of Columbia and in 33 states, lenders are not required to deliver foreclosure notices to homeowners before the foreclosure process is started. This again hastens the increase in foreclosures by state.

The third factor is the lack of law requiring lenders to find at least one alternative before proceeding with a foreclosure. With the exception of only Connecticut and California, all states allow mortgage firms to foreclose defaulting loans immediately without exploring ways with borrowers how they can save their homes. Naturally, increased foreclosures by state is the result of this factor.

Next factor is the right of the lender to disregard last-minute efforts to pay past dues, penalties and interests. The lender can go ahead with the foreclosure and sale of a home even if the borrower provides the money to update payments. This is in effect in 29 states, again another factor aggravating foreclosures by state.

One of the things that directly increase the burden of borrowers are the stiff penalties and fees that lenders add to the borrowers’ balance once they fall behind in payments. All states, with only three exceptions, allow the imposition of penalties and fees immediately. Expectedly, foreclosures by state increase quickly because homeowners drowning in debt are further pushed down by additional fees. The only states with laws against immediate imposition of penalties are Pennsylvania, New Jersey and Massachusetts.

After a foreclosed home is sold, the former homeowner is still not safe. Mortgage lenders in 36 states can still file a claim to recover from the homeowner the difference between the loan balance and the auction proceeds.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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