How the Mortgage Foreclosure Process works
Some people get the mortgage foreclosure process and the tax foreclosure process mixed up. The mortgage foreclosure process is more common and it happens all year round whereas the tax foreclosure process is usually once a year. When people fail to pay their mortgage payments, the lender will initiate the mortgage foreclosure process to take their homes away.
A mortgage foreclosure process can be lengthy and a headache for both the homeowner in foreclosure and also the bank. This is why many banks are willing to consider all reasonable offers to avoid having to go through with the mortgage foreclosure process. Banks have to comply with state laws on foreclosure when foreclosing.
For the people in foreclosure, the mortgage foreclosure process usually starts with them missing monthly payments. The lenders usually don’t threaten foreclosure until three payments have been missed. The mortgage account is considered in default at this point.
If the mortgage account is in default, then the lender will send the homeowner a notice of default. This is not a foreclosure notice but if you receive a notice of default, the next one might be a foreclosure notice. Most homeowners are scared but the lenders are often more than willing to negotiate at this point.
The notice of default often accompanies the notice of trustee’s sale and they are served to the homeowners. In some states, these notices are mailed by certified mail and in others, although more rare, they are served by the Sheriff.
Sometimes the lender will also put the foreclosure sign up infront of the home that is being foreclosed on. This part of the mortgage foreclosure process is the worst for homeowners because friends and neightbors can see that they are in foreclosure and it is embarrassing.
The homeowner usually has few chances to pay off the mortgage balance and get the home back in his or her name. However, most people in foreclosure cannot find money to pay off the bank and getting a new loan can only lead to more problems. The last day a homeowner can reclaim the home is about six days before the foreclosure auction.
When the day of the trustee’s foreclosure sale arrives, the lender will auction off the foreclosed home to the highest bidder. This is the final stage of the mortgage foreclosure process when the lender can finally get rid of the property and get some of the money back. Highest bidders are often people looking for cheap homes to fix or move into. Many of them are real estate investors.
Filed under: Business