Foreclosure is a fancy way of saying “home repossession”. Foreclosures result after a borrower has missed not one, but multiple, mortgage payments, resulting in the bank taking ownership of the home as collateral. The foreclosure time line varies from one state to another, yet the process is nearly identical. Lenders nationwide are relegated to a systematic notification system leading to a foreclosure, redemption and eviction. For homeowners facing foreclosure, education on the process is critical.
Judicial vs. Non-judicial foreclosures
A foreclosure proceeding being judicial or non-judicial will depend on the documentation signed at closing. A judicial foreclosure requires that the lender allow the borrower to have a hearing before the auction of his property, a non-judicial foreclosure does not require a hearing, allowing the lender to auction or sell the property with the assistance of an appointed bank trustee. While nearly every state allows for a judicial foreclosure proceeding, most Deeds of Trust give lenders the right to foreclosure using non-judicial methods. The difference between the two for borrowers: the judicial foreclosure gives the borrower more rights.
Notice of default
Once a mortgage is more than 30 days late, it is in default. The default notice is the “kick off” for the foreclosure proceedings to begin. A notice is sent to the borrower informing them that they need to remedy the default and bring a mortgage current…or else.
Notice to accelerate
After a mortgage is unpaid for 90 days, lenders will send a borrower—via certified mail—a notice to accelerate the loan. This notice informs the borrower that the entire amount of his loan is called due. For example, if a borrower has a mortgage of $128,000 and has missed over three months of payments, he now owes the bank the entire $128,000 balance. The bank gives a “drop dead date” informing the borrower that he has until a specified date to come up with the balance, and if he does not, the home is foreclosed.
Notice of foreclosure
Approximately 30 days after the notice of default is sent, the borrower will receive the official foreclosure notice. This notice is served by a county process server or sent via certified mail. This is the notice including the foreclosure auction date and is the formal notice from a lender’ attorney that the time is up.
The auction
The foreclosure auction is the formal sale of the property. This is done either at the county court house where the property resides or in front of the property itself. If a suitable bidder is not found, the lender will retain the property as an REO (Real estate owned) home, and put it up for resale on the open market.
Right of redemption
Only a handful of states allow a borrower to redeem a property once it has been foreclosed upon. This is the right that allows a borrower a specified time to come up with all missed mortgage payments, interest, late fees and court costs to redeem ownership. This period will range from 10 – 365 days depending on the state. Yet, don’t let this “right” fool you as a borrower, there are plenty of loopholes that allow lenders to cancel or extinguish the right to redeem a home. Each foreclosure (and the circumstances surrounding it) is different, thus regardless of state law, once a foreclosure has occurred; the chances of redeeming a property are slim to none.
Eviction
Homeowners that have not vacated a foreclosed property are considered trespassers. They will be served with an eviction notice from the county sheriff and if they fail to comply, will be forcibly removed, and all personal belongings ejected from the residence.