Loan Modification

Why Are Connecticut Foreclosures So Weird? ? (Pt 2)

By Eugene S. Melchionne, Connecticut Consumer Lawyer

Foreclosures in Connecticut are unlike foreclosures in 48 other states.  (Connecticut and Vermont share this weirdness.)  In most cases, a foreclosure does not result in an auction.  Usually, the lender will just come to own your property without an auction.  (Read Part 1 to find out what the first steps are.)

So if there is no foreclosure auction because there is no value (or equity) in the property, what happens?  Two words: Strict Foreclosure.  What is strict foreclosure?

If there is no equity in the property for the owner of the home, the Court will set a day for the owner to pay off the lender’s debt IN FULL.  If the mortgage is paid in full (including all the court costs and attorneys fees), the lender is required to issue a release of the title back to the owner of the equity, the homeowner.  If you do not pay off the foreclosed loan in full on the appointed day, your ownership in the poreprty is extinguished and you no longer own the home.  The date set by the Court is called the Law Day.

There is no auction, no sign on the property and no opportunity to stop the running of Law Days by filing a Chapter 7 Bankruptcy.

What if there are more than one mortgage or lien on the property?  Well then, each lienholder or mortgage lender will get a Law Day set in the reverse order of their priority.  The homeowner, owner of the equity, always get teh first Law Day.  The lender or lienholder that is last in line of all the liens or loans gets the next Law Day.  And so it continues in countdown fashion until we get to the foreclosing party.  On that last day the foreclosing party (usually the first mortgage lender) will become the owner of the property.

No muss, no fuss.  The next thing you will hear is the Marshall coming with the moving van to put you on the street.  How weird is that?

Related posts:

1. Why Are Connecticut Foreclosures So Weird? – (Pt 1)
2. What is Strict Foreclosure?
3. When Foreclosure Can’t Be Stopped by Bankruptcy

Full post as published by Mortgage Law Network on November 30, 2009 (boomark / email).