There’s actually quite a few steps involved with the whole foreclosure process, from the first missed payment till the actual time the house is sold and the eviction notice posted to any residence living there. If you are facing the possibility of foreclosure, it’s a good idea that you understand the whole process.
You can actually stay in your home during the entire process and only must vacate several days after the actual eviction notice is posted. This whole process can take months, and in some cases where the courts are bogged down by many foreclosures, a couple years — especially if you’ve hired a lawyer to file basic paperwork challenging some of the foreclosure details.
If you are looking to see what sort of mortgage options you have to PREVENT foreclosure, make sure you read our Guide on Preventing Foreclosure so you know your options. Note, however, this prevention guide looks at negotiating special mortgage loan terms with your lender though mediation. Be sure to also read our Help with Mortgage Assistance Guide while you are at it.
There is another ‘avoid foreclosure’ option in which you can stay in the house during the foreclosure process, hiring a lawyer to contest key parts of the foreclosure with the result that the whole process of foreclosing your home can take a couple years to complete. Note this method is only temporary though — it doesn’t so much focus on saving your home as in living in it mortgage free for as long as possible. It could be though you can use that extra time to sort out your financial situation so you can resume payments and keep your house though.
1. ) First Missed Payment
When you miss a single mortgage payment, your mortgage goes into ‘default.’ What happens and how long before your move into foreclosure depends completely on the specific lender owning your loan.
2. ) Grace Period
If you miss a payment, you typically enter into a short period of 2 weeks to 1 month called the Grace Period. You can send a payment in with no penalty.
3.) Notification of Missed Payment
After the grace period expires, your lender will send out an official notification of a missed payment. There may or may not be a late fee attached.
As long as you make a payment, things will be back on track with your mortgage at this point, though you may take a credit score hit, lender depending.
4.) Demand Letter
If two or more missed payments occur, the lender may issue a sterner notification in the form of a ‘Demand Letter’. This is a more formal type of notice a basically ‘make a payment or we’ll begin the foreclosure process’.
Again, if you make a payment and or contact the lender and notify them of your financial difficulty, the process can be halted here and the situation dealt with.
IF you don’t make any payment, your lender may start the foreclosure filings in the local court system. At the Demand Letter stage, you can still seek to save your home by pursuing mortgage assistance programs – loan modification, credit counselling, or other mortgage assistance options. But it’s critical you start a dialogue with your lender at this point IF you want to keep your mortgage.
5.) Notice of Default
After the Demand Letter is issued (2 or more months of no payments on your part) and still no payments sent in, then you may get a Notice of Default which occurs after 3 months of no payments. This is basically when the lender officially files foreclosure on your home with the court system. You typically have between twenty to ninety days to start payments again on your home to bring it out of foreclosure status.
6.) Reinstatement Period
The period AFTER Notice of Default is issued by the court where you can still make payments on your home to keep it and take it out of foreclosure.
IF after 90 days from the Notice of Default no payment is sent in, you are issued the Notice of Foreclosure.
7.) Notice of Foreclosure
Occurs 90 days after Notice of Default. This basically officiates the sale of your house to the highest bidder. A public auction date is set for your house to be sold. The lender also must publish the details of the upcoming house sale and the current home owner’s information in a newspaper.
8.) Foreclosure Auction
The actual sale of your home to the highest bidder at a public auction event. The house can be bid on by anyone – even the current owner of the home.
Keep in mind that as the current owner of a home it’s better to make a deal with the lender to renegotiate the loan terms (perhaps seek a principal reduction or short pay refining) rather than wait till foreclosure then bidding on your own home. It will be cheaper for you (not to mention you’ll have to have some collateral to actual make the bid, bring to question why you didn’t make payments on your home in the first place…)
9.) Eviction Notice
You can continue to live in the foreclosed home up until the point where you are given an official eviction notice. This is basically a notification given to anyone currently living in the foreclosed (and now sold home).
After the eviction notice is given, the current homeowner / house occupants are still given several days to vacate the home. IF the occupants have not vacated the premises, the sheriff will show up and forcefully remove them.