The Typical Process for a Foreclosure
When you are unable to make your house payment, knowing what is going to happen and when it could happen may make the foreclosure process easier to deal with. You may even be able to avoid foreclosure completely if you are proactive. The bank does not want your house but would rather that you paid it.
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Function
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A mortgage secures a loan that you have promised to pay back. Usually this is money that you borrowed to purchase the home. If you are late on your payments, the lender will eventually begin the foreclosure process. This allows it to recover either a portion or all of the money loaned to you by eventually selling the house.
Time Frame -- Early in the Process
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The mortgage lender will usually assess a late fee when your payment is not made by the 15th of the month. After that, it may contact you to see why you are late and if you are going to be making the payment soon. At 30 days past due, the late payment is usually reported on your credit report. The lender may hire someone to do an inspection at that time. The inspector usually will drive by the house to see if it looks like someone is living there and if everything is in order. The inspector may also speak with you about the delinquency. At 60 days past due, the loan may enter pre-foreclosure status. The lender usually will not accept anything less than the full amount required to bring the payments current; some lenders will work out payment plans to bring the loan current but usually within a short time frame, such as two months.
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Time Frame -- Later in the Process
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If loan payments continue to be missed, and especially if the borrower is not trying to work out a plan to bring the loan current, the lender will take more definitive action to proceed with the foreclosure. The lender will refer the loan to its foreclosure department and will probably hire a local attorney to carry out the foreclosure. The lender and its attorney will deliver different types of notices and documents to the delinquent borrower. Notice may be served by the sheriff or other law enforcement. Eventually the process will end with the seizure and sale of the home. It is much more difficult to keep your home when the process proceeds to this stage.
Types
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There are three different types of foreclosure. Their uses vary depending on your state. In a judicial foreclosure, the lender files a lawsuit against the borrower. The borrower usually has 30 days to bring his payments current or the house is sold at auction. This sale is carried out by the courts. In a power-of-sale foreclosure, the lender sends notice to the borrower that payment is due. If the borrower doesn't make the payment by the appointed time, the lender carries out the sale itself with limited or no court action. A strict foreclosure is when the court issues a time line for the borrower to pay the mortgage. If he cannot pay in that time frame, the court gives the lender possession of the property without a sale.
Prevention/Solution
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The only way to prevent a foreclosure is to pay the payments on time and bring the loan current. You may be able to stop the foreclosure with some early action. Contact your lender when you are first going to be late. Keep it up to date as to the status of your payment. Work out an arrangement with the lender to bring the payment up to date in a timely manner. If you cannot make the payments and will not be able to in the future, you probably need to sell the house. If you owe more on the house than its fair market value, attempt to work out a short sale with the lender. This is when the lender agrees to a sale in which it receives less than the amount due.
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