How Does a Mortgage Foreclosure Work?
Although you may have an image of the sheriff coming to your door with a crew to throw you and your belongings out on the street the second you fall behind in your mortgage payments, it doesn't happen that way. Foreclosure is an orderly, legal process that takes time and is designed to allow you to clear your default, and for the bank to sell your home and apply the proceeds towards your balance if you are unable to pay.
Other People Are Reading
-
Falling Behind
-
When the mortgage payment is due on the first of the month and you do not pay it, you are behind in your mortgage. Most mortgage companies give you a few days grace period to make this payment. If you continue paying late, they will charge you a late payment fee, usually around the 15th of the month. If you do not make your payment the first day of the next month, you are more than 30 days past due. However, you may still make normal payments.
Pre-foreclosure
-
If you continue to be past due on your mortgage, your bank may place you in pre-foreclosure status, begin to call you about your delinquency and send you a letter stating that you are in default. The bank also may require you to make up the complete past due amount at that time. You will be given a time frame, usually around 30 days, to pay the entire past due amount. Sometimes the bank will make special arrangements to allow you to catch up.
-
Starting the Legal Process
-
After the time period to pay the past due amount has passed, your bank may send you a more official letter stating that the foreclosure process is under way. It refers the loan to the foreclosure department, and may retain a local attorney to handle the legal details of the process. This time period varies, depending on the bank. Some processes start as soon as you are 90 days past due, and others may take a year or more to begin. Many banks still allow you to stop the foreclosure process by paying all of the past due payments, plus any fees that they have charged due to the foreclosure.
Foreclosure and Sale
-
The foreclosure and sale process varies depending on the state where the home is located and the banks' preferences. There are three types of foreclosures. A judicial foreclosure is when the lender files a lawsuit in court. The court gives you 30 days to pay and if you don't, the court or the sheriff sells the house at auction. A power of sale foreclosure is when the lender sends out the notice of sale, and if you do not pay on time, the lender conducts the auction to sell the house. With strict foreclosure, the lender files suit against you, and if you do not pay on time, the property is transferred directly to the lender without auction.
-
