Normal Process of Foreclosure

The foreclosure process culminates with transfer of property ownership.

Foreclosure is the legal process by which a lender can take possession of your home for nonpayment of mortgage. A mortgage is a contract that describes certain terms and obligations that must be met by the borrower in order to be deemed valid. The most common violation of terms is by nontimely payment of the monthly loan installment. The bank will not ignore this omission for long. Expect swift action to protect the lender's interest in the house, a process referred to as foreclosure.

Nonpayment

A single instance of failure to pay a principal or interest installment that is due is legal grounds for the lender to initiate foreclosure proceedings; however, some allow up to two missed payments. In almost all cases, expect to be served a notice of default in the event you miss three loan payments. There's a high probability you will already be aware of the delinquency because officials from the lender will be calling, trying to establish contact and help resolve the problem.

Notice of Default

The first official stage of foreclosure is when the lender files a legal motion called a notice of default either at the local county recorder's office or the local court of jurisdiction within which the property is located. The notice of default officially informs the borrower that foreclosure proceedings have begun. This notice also kicks off what is called a reinstatement period, during which all delinquent payments and late fees can be be paid and the foreclosure halted. This period normally runs up until five days before the foreclosure sale.

Notice of Sale

If the deficiency isn't corrected within three months, a sale date is set for the property. This action, also taken at the court or recorder's office, is called a notice of sale. The borrower is provided with a copy, a notice is posted on the property and notification is printed for three consecutive weeks in the local paper of record that covers the area the property is located. The notice specifies the time and location of the sale, which is often on the steps of the county courthouse.

Trustee Sale

The trustee sale is the final step in foreclosure, and is the process by which the lender puts the property up for auction to the highest bidder. It does not have to accept any of the bids, but after allowing the foreclosure process to run its full course, the lender is often eager to simply get the property off its books. If the borrower still resides on the property, he is required to vacate the premises within 72 hours of the new owner's purchase.

References

• LoanSafe.org: The Foreclosure Process
• U.S. Department of Housing and Urban Development: Foreclosure Process