What Happens in a Bank Foreclosure?
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What The Bank Does
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If you have missed three or four payments on your mortgage, and the bank and you cannot agree on a way for you to catch up, the bank will exercise the foreclosure clause in your mortgage and demand that the balance be paid in full. Once you have reached this point, the bank will demand that you make higher payments than what is called for to bring your loan back to current status.
The bank will then file with the court its intention to foreclose on your property. You will notified by the court. The court will conduct a hearing on the bank's request and you will be given the opportunity to explain your side. After the hearing, the court will most likely issue a foreclosure order, and it will advertise that it has agreed to it. The bank then is free to auction off the property. If there is no buyer, then the bank will take possession of the real estate. In either case, you will be obligated to move out. Eventually, when the property is sold, if it brings less than the amount of the loan, the bank is free to sue you for the balance.
Timing
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Depending on the laws of your state and if the bank wants to dispose of the issue as soon as possible, your property could be foreclosed upon in about two months, after the bank petitions the court. However, in most cases, state laws allow for ample notice to the property owner, which means that most foreclosures will take about six months to complete.
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Keeping Your Home Out of Foreclosure
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Working with your lender is the most appropriate first step. If you have fallen behind on your mortgage payments because you have recently lost a job or high medical expenses have prevented you from staying current, the bank may lower the payments to accommodate your situation. Or the bank may be willing to refinance your mortgage, particularly if the prevailing interest rate is lower than when you first signed the mortgage. That might result in reducing the mortgage payments in keeping with your budget. If you and your bank cannot agree to any of these changes, you can request that the bank grant you the right to sell your property and pay off the mortgage. This option will keep the house out of foreclosure and maintain your credit rating.
As a last resort, you could declare bankruptcy, thereby forestalling foreclosure, but do so knowing that it will appear on your credit records for up to seven years, and that will seriously hamper your ability to borrow in the future.
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