What Will Happen During a Foreclosure?
The exact procedure that will occur in a foreclosure sale of your home depends first on the state laws where you live, and second on whether the lender follows judicial or nonjudicial foreclosure. As the names imply, judicial foreclosure involves filing a lawsuit in court, while nonjudicial foreclosure does not require court involvement. About half of the states allow nonjudicial foreclosure. All states allow judicial foreclosure.
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Default and Acceleration
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The first step in the foreclosure process is for your mortgage lender to provide you with a written notice of default and acceleration. Default means you have fallen behind on your payment obligations, and acceleration means that the lender is demanding payment in full on the total amount outstanding on your mortgage, which includes principal and interest. Even though the lender accelerates, however, state law provides borrowers with a reinstatement option that allows the borrower to bring the mortgage current by paying the delinquent amount. Most reinstatement periods expire after three to six months.
Judicial Complaint
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If your lender is pursuing judicial foreclosure, which is the required method of foreclosure in about half of the states, then the lender will have to file a lawsuit against you. In legal terms, the lender will file a complaint and serve you with a summons and a copy of the complaint. If you respond to the complaint by filing an answer then the lender will have to go to trial to get a foreclosure order from the judge. If, however, you don't respond to the complaint then the lender can get a default judgment of foreclosure against you.
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Nonjudicial Procedure
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About half of the states allow lenders to foreclose nonjudicially, which means they are not required to file a lawsuit. Instead, the lender hires a third-party trustee who provides at least 30 days notice of a public auction where the property will be sold. The auction is called a trustee's sale. The trustee will hold the auction and sale.
Public Auction
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At the end of a judicial foreclosure lawsuit, the lender will obtain a foreclosure order, and the local sheriff's department will execute that order by holding a sheriff's sale. In a nonjudicial foreclosure this is called a trustee's sale. Both a sheriff's sale and a trustee's sale operate in similar fashions. The general public is allowed to bid to purchase the property. The high bidder at the auction will take title to the property. You will have to move out of your house immediately after the foreclosure sale, and if you don't, you will be trespassing on the new owner's property.
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References
- Photo Credit Auction image by Attila Toro from Fotolia.com
