Foreclosure is the legal process by which a lien holder repossesses a property. This happens most commonly when a homeowner defaults, or fails to make a mortgage payment. While each state has different laws governing the process of foreclosure, certain steps are common everywhere in the country.
After the first mortgage payment is missed, the property may go into pre-foreclosure. This is the period when the lien holder, such as the bank that holds the mortgage, initially begins to send notices. This can come in the form of letters or phone calls. If they haven't heard from the homeowner after 30 to 60 days, he may receive more letters or phone calls. At this time the homeowner may consult with a housing counselor for help or make the necessary payments to become current again.
Notice to Accelerate
After 90 days of delinquency the lien holder's attorney will typically send a demand letter, which is also known as a notice to accelerate. This means the homeowner has 30 days to make the past due and present payments required to make his obligations current. If this does not happen, the lien holder will start the official process of foreclosure by taking the matter to the courts. It is advised that the homeowner speak with a housing counselor or attempt to work out some payment arrangements at this time.
Notice of Default
If the mortgage is overdue by four months, the homeowner will receive a notice of default that indicates that he has defaulted or failed to pay his loan. A notice of default outlines the entire amount of the loan that he needs to pay to get current. If after 30 days he does not make the necessary payment, he will also incur attorney's fees.
If the homeowner does not satisfy the terms of the notice of default, he will receive a notice of a lawsuit from the lien holder. The period of time to respond depends on the state, but during this period the homeowner is required to go to court and explain why he has defaulted.
If the homeowner fails to respond to the lawsuit or is unable to satisfy the lien holder's demands at this point, he will receive a notice of sale. This is when the home will go up for auction. At this time the public will be made aware of the date of the sale. At the date of the sale, the home will go up for auction.
The redemption period is the time after the auction when someone has purchased the house but the homeowner still has a window of time to keep the home. This will require paying back the entire balance of the mortgage plus other costs that have accrued.
At this point someone else has control of the property, and the homeowner will be issued a notice to vacate. This can be enforced by the sheriff's department if the home is not vacated by the deadline.