There are a myriad of reasons why a person might miss or be unable to pay a monthly mortgage payment. Once that happens, it is important to be aware of the legal actions the lender or mortgage servicing company can take.
Alabama permits mortgage lenders to include what is called a Power of Sale clause in the promissory note and mortgage signed by the borrower. This means that when the borrower defaults on the monthly payment obligation, the lender is permitted to accelerate, or call due, the full principal balance of the promissory note, and then advertise the property for sale.
The lender or servicer is required to send the borrower a letter that informs the borrower that the loan has been determined to be in default, and that the full balance of the loan is due. This letter usually includes a date that the the home that secures the loan will be scheduled for a foreclosure sale.
In many other states, the mortgage lender is required to first file a civil action, or lawsuit, against the borrower to obtain a court order to sell the home at what is called a “Sheriff Sale.” In a Sheriff Sale, the county sheriff holds an auction where several properties are called for the highest bid and sold. This is usually not the case in Alabama.
The most important thing to know as far as defaulting on your loan is that you must file a Chapter 13 Bankruptcy case BEFORE the foreclosure sale in order to stop the sale. You can lose your ownership interest in the home if you permit the lender to proceed to the foreclosure sale.
If you have questions about the foreclosure process please do not hesitate to call us.