How to Foreclose on a Mortgage
Foreclosure on a mortgage can happen for many reasons, including the lender losing his job or the untimely death of the lender. Foreclosing involves specific knowledge by the lender and precise steps to make sure it is done right. Nothing can be done on a foreclosure until the lender has defaulted on the loan. It is at this point that a lender can take the following steps.
- Difficulty:
- Moderately Challenging
Instructions
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File a notice of delinquency. A notice of delinquency is a form that is filled out stating that a borrower has an overdue payment. A notice of delinquency is not only used in the case of a home foreclosure, but can also be used in situations of child support or unpaid taxes, among other things. You can print a notice of delinquency from the U.S. Legal Forms website (link provided below). If your state does not provide the form online, you should contact a lawyer to get a form for your state.
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Contact a foreclosure trustee. A trustee is a firm that handles the foreclosure details for the lender. This includes processing the necessary legal forms, public announcement of the foreclosure, and handling the auction of the home being foreclosed. You can find a foreclosure trustee in your area through the All Foreclosure Information website (link provided below).
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The foreclosure trustee must then file a notice of default at the request of the lender. This typically happens anywhere from 3 to 6 months after a notice of delinquency has been filed. The borrower, as well as the county where the property is located, will be notified, giving the borrower a final chance to make good on his payments before the house will be auctioned. This is called a reinstatement period.
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If the borrower has not made an attempt to get the loan caught back up, there will be a notice of sale. The sale will typically be held 21 days after the notice of sale has been recorded within the county. The sale will be published three times within that 21 days. Some states may have other regulations concerning this length of time, but this is the general rule of thumb.
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If the property does not sell through a public sale, the lender can buy the property through a credit bid. The bid that the lender makes has to be less than or equal to the amount left on the current loan in order to be considered. In turn, the lender can sell the house through a private sale. The borrower will end up still owing money, but it will be on property that the borrower can no longer reside in. In other words, the debt is not cleared just because the bank took the mortgage back.
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Tips & Warnings
If you think you will miss a mortgage payment, contact your mortgage company as soon as possible.
Try to get lower payments with a higher interest rate for your mortgage.
Discuss refinancing to keep your home.
Check with your state laws to get the proper length of time it takes for a home to actually be put up for auction.
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