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Financial Dictionary - Foreclosure
Foreclosure
In a foreclosure, the bank collects the loan debt if the mortgage borrower is late in paying the instalments, thus settling the outstanding account. This happens when the borrower owes between three or six monthly instalments. The financial institution will claim the overdue monthly payments and also the rest of the outstanding mortgage, charging 20 to 25% interest as a penalty and the legal costs that are generated, which the borrower must pay.
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Ultimately, the home may be seized and you can be evicted. The process will also take some time, though we can pause proceedings if we pay off some of our debts, or if we reach an agreement with the bank. If things reach this point, the process is as follows:
- Notice of default: approximately 15 days after the first default.
- Official communication from the bank by SMS, e-mail or letter after the first month.
- Registration on delinquent debtors list, this happens five months after the non-payment.
- Judicial action. Under the Mortgage Act, the deadline for applying the procedure has been extended (and retroactively): it is now from the 12th non-payment in the first half of the mortgage, and from the 15th in the second half.
- Registration of the encumbrances on the property in the Property registry.
- Auction notice and publication in the Local Council, in the Property Registry, in the courts and in the Official State Gazettes, including the date, time and price of the sale of the property. The borrower, however, does not have to be informed of all this information.
- Auction. If nobody wants to buy the property, the bank can keep it for 60% of its value. And if this price is not higher than the amount we owe the bank, then the bank may seek to cover the shortfall by seizing our present and future assets (current accounts, pay checks, etc.).
- Eviction. We will have to leave our home, accompanied by court officers, a locksmith, who will change the lock and, if necessary, the police.