How the Foreclosure Process Works
The foreclosure process starts when a homeowner doesn't pay the mortgage and the lender takes the house to satisfy the debt. Though the entire process varies from state to state, there is a general series of events that takes place between the time that the loan becomes delinquent and when the home is sold to new owners. It is possible to stop a foreclosure at almost any point during the process, depending on the laws of your state, as long as you can satisfy the delinquent debt.
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Missed Payment
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A missed payment is the first step in the foreclosure process, according to the University of Florida website. You owe lenders money every month that is applied to your mortgage balance and interest charges. A late charge may be assessed when the payment is not made by a certain day of the month, depending on the terms of your mortgage. At this point, you have an opportunity to pay what you owe or to discuss your financial situation with your lender and attempt to set up a solution.
Demand Letter
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After loan payments have been delinquent for 45 to 60 days, the lender will send you a notice called a breach, or demand, letter, explains the University of Florida. This letter warns you that you're not fulfilling the terms of the mortgage and may offer you 30 days to fix the problem and catch up on your payments.
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Notice
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The lender may hire a foreclosure attorney if the matter is not resolved 30 days after you receive the demand letter. The attorney will begin the process of registering the home for foreclosure, which can include posting a notice in the courthouse, publishing an auction notice in the paper or simply letting you know that you have to be out of the house in a certain number of days. In many states, homeowners can still repay their missed debt and retain their house even after notice of an auction has been posted.
Notice of Sale
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Homeowners should receive a Notice of Sale in the mail. This document tells you when, where and in what way your home will be sold, according to the County of Los Angeles Department of Consumer Affairs website. Judicial foreclosure means that the home will be sold by the local sheriff's office. This is allowed in every state, explains the U.S. Department of Housing and Urban Development (HUD). Statutory foreclosure, allowed if there is a power of sale clause in the mortgage contract, means that the auction is carried out by the lender.
Auction
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The auction is held and your home is sold to new owners. Depending on the state, you may have up to 30 days from the date of the sale to move out of the house before the new owners take possession. If the proceeds from the sale of the home aren't enough to cover the debt owed to the mortgage company, then you still may be responsible for the unpaid debt.
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