Understanding the Foreclosure Process
There is no question that a foreclosure can be emotionally difficult and that the reality of a foreclosure can be difficult to face. However, in order to prepare yourself and your family for the realities that a foreclosure can bring, it is important to understand what typically happens in the foreclosure process after you receive your foreclosure notice.
Typically, a foreclosure notice, also known as a notice of default, is provided to the borrower after the mortgage has not been paid and the loan is in default for a certain amount of time. That time varies from state to state. In most cases it occurs after there is a substantial default of 3 or more missed payments on the loan. It can sometimes be avoided by making a call to your lender and explaining both the reasons why the loan payments have been late and your proposed repayment schedule.
Foreclosure Redemption Period
Once the foreclosure notice has been served on the borrower, the borrower typically has a set amount of time to “redeem” the property by paying back all of the missed payments plus interest and fees. This time period varies from state to state and is known as the redemption or reinstatement period.
After the redemption or reinstatement period has expired, the homeowner will receive a Notice of Sale that sets the foreclosure sale date. The notice must be provided to the homeowner and published elsewhere as set by state law. Some states require the Notice of Sale to be published in local newspapers for a certain amount of time; other states require the notice to be posted on the property and at the place where the sale will take place.
Typically, homeowners have until 5 days before the foreclosure sale date to make all of their payments (including interest, fees and foreclosure expenses) current. If the homeowner is unable to do that or make alternative arrangements with the lender then the foreclosure sale proceeds.
Foreclosures Vary by State
Foreclosures are handled differently in different states but often the property is sold to the highest bidder at a foreclosure auction. The opening bid is typically the amount of the loan and any interest or other fees owed to the lender. The buyer is provided clean title to the property meaning that it is free from any outstanding loans, including second mortgages and other debts secured by the property.
Statutory Rights of Redemption
Many states have statutory rights of redemption which allow the original homeowner to reclaim his or her property by paying the required amount of money within a certain statutory defined period of time after the foreclosure sale. The amount of time ranges from a few months to one year depending on the circumstances of the sale and the state in which the property is located.
Many lenders, especially in difficult economic times, are willing to work with borrowers to help them make their loan payments and avoid foreclosure. Sometimes, however, foreclosure is inevitable. If your property proceeds to foreclosure then it is best that you know what to expect and when to expect it so that you can prepare yourself and your family accordingly.