Repossession isn’t an event which often brings recurring nightmares among homeowners. It occurs in several stages with opportunities available before the homeowners at every stage. If your house is due for repossession, or if you are a buyer interested in buying a repossessed property, here’s how the process unfolds:
• The lender cannot directly make a claim to take possession of your house. They must take several steps before such initiating legal action.
• The bank is legally required to send default notices. One of these notices informs borrowers that they can fix the default within a stipulated period along with advice about mediation. If the house owners fail to reply or take action after the expiry of the given period, the lender is legally free to make the whole loan payable. If the default payment and the usual repayment are paid, the contract reverts to its original form.
• The bank will then make an application to the court asking to take possession of the property and state reasons for the same. You are given notice of the hearing date and are expected to reply to his stating your reasons for the default. Consistent no shows could lead the court to decree an ex parte decision for the lender.
• After hearing arguments from both sides, the judge decides, either, for repossession, in which case, the homeowner will be evicted, and the property sold in auction. Or, make a suspended possession order, i.e. house owner will be allowed to stay under certain conditions (like repaying arrears in installments), or, adjourn the case, in which case you will have time to decide on further action, or, dismiss the case against you.
• As earlier said, if the court decides for the bank, they may choose to sell the house or rent it out until further action is decided.
• Most banks decide to sell the property and recover the loan as early as possible. But they’re also obliged to get the back loss. If the market is for the seller, they might sell a base price beyond which they will not sell. In a buyer-oriented market, it’s not so easy to set such preconditions. They may decide to auction the property, in which case, the lender will open the bidding at a sale price they hope to recover.
• In some countries, owners are given time to redeem their property. This is called redemption period. The recovery time and condition vary from lender to lender.
• If the bank cannot recover the total loan amount, it may hold you liable for the outstanding amount and move proceedings for recovery. This depends on the lender and the rules applicable in the state. For example, in some situations, the bank decides not to pursue the homeowner for further debts.
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