When Do Banks Foreclose on Mortgages?
Banks enter into the foreclosure process when borrowers stop making mortgage payments. If you stop making payments on your mortgage, it will only be a matter of time until the bank forecloses on your property if nothing is done. The amount of time that it takes will differ from one state to the next.
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Grace Period
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When making mortgage payments, you have a grace period that can help you avoid being late. With most lenders, this grace period is about 15 days. Once you get past 15 days after the due date of your mortgage payment, the lender will assess a late fee. The lender will generally try to contact you and ask you to make your payment at that time. If you do not make your payment, the amount will be added to your next mortgage statement.
Default
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If you miss multiple payments, then the lender will file a notice of default. Each lender will be different when it comes to how long they wait until filing the notice. Some lenders file a default notice after two months, while others wait three or four. The average amount of time before this process occurs is about 90 days. Once your mortgage goes into default, you still can remedy the problem. But if nothing is done it will go into foreclosure.
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Judicial Foreclosure
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The method that is used for the foreclosure process will be determined by state law. Some states use a process known as judicial foreclosure. With judicial foreclosure, the lender files the notice of default and then has to go through the court system. The court will then make sure that the debt is valid before issuing a foreclosure order. Then the sheriff will be in charge of having a foreclosure auction. This process can take from three to six months.
Non-Judicial Foreclosure
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Other states use a non-judicial foreclosure process. With this type of foreclosure, the court system does not have to get involved. When the homeowner does not make payments on time, the lender can file a notice of default with the county. Then the lender will mail a notice of sale to the homeowner. The lender will also publish the notice in the newspaper. The lender can then auction off the property without the help of the sheriff.
Prevention/Solution
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Even though your mortgage goes into default that does not necessarily mean that you have to go through with foreclosure. At that point, you can talk to your lender and potentially come up with a solution. You can set up a repayment plan or participate in a loan modification program. Even after the house sells at a foreclosure auction, you have a redemption period in which you can buy back the property. In some states, this redemption period lasts a full year.
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References
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