When you default on your mortgage payments, the lender recovers their property through a process known as foreclosure. Once the bank forecloses a house, the lender can sell it to recover their money.
Borrowers find paying their mortgage a challenge when they lose their jobs, separate or divorce their partners or get into massive debts because of medical bills.
When there is an economic downturn, it becomes difficult to keep up with the payments. Here is a basic foreclosure process.
The Phases of Foreclosure
- Payment default
Missing a single payment means that a borrower is in default. The lender notifies the borrower that payment is late, and may grant a grace period. After the grace period runs out, a late fee is charged.
If a borrower skips two payments, a demand letter is sent to them. During this time, the lender makes sure the borrower is up to date with payment terms.
- Notice of default
If you fail to pay for more than three months, the lender notifies the County Recorder’s Office by recording a notice of default. They also send a copy of this document to the borrower.
At this point, you need to make payments before a reinstatement period of 90 days is over.
- Notice of foreclosure
If you can’t make the payment within the reinstatement period, the foreclosure process may start. Your lender needs to alert the county recorder’s office by registering a notice of trustee’s Sale. They also need to publish notices in newspapers for not less than three weeks prior to the auction.
Nevertheless, you have less than five days to pay up before the auction.
- Public auction
The lender needs to come up with an opening bid for the property. This opening price is determined by factors such as liens, unpaid taxes, and the loan balance. The property is then sold at a public foreclosure auction, usually to the highest bidder.
After the sale, a trustee’s deed is awarded to the new buyer, indicating that they are the authorized owner. At this point, you have three days to vacate the property or you could eventually be kicked out by the local Sheriff or an agent of the court.
- Real estate owned property
If the property fails to sell during auction, it is transformed to a real estate owned property (REO). The lender takes over as the owner, and may sell it through an REO asset manager.
They may need to cover some expenses and take care of any tax liens to make the property more appealing. If you fail to vacate the premises during this stage, the lender may initiate an eviction.
Try catching up with the payments if possible
Your lender might offer a way for you to catch up with payments. Maybe you need just a few months to get back on your feet.
It is important to discuss such issues with your lender. They may provide a way to prevent foreclosure. If the foreclosure can’t be avoided, it is best to know the outlook of the process to help you prepare yourself mentally and financially.
Are you dealing with a potential foreclosure? Our company strives to provide fast solutions for homeowners in need or who are experiencing financial hardship. Let us help put your mind at ease and make your situation more comfortable. Contact us to discuss options for your property! 833-387-7433
