What Happens When You Go Into Foreclosure?
Foreclosure is the process where a lender takes a non-performing borrower's home. It is the last step in a process that begins when the homeowner stops making mortgage payments. Once the process begins, it becomes a legal matter that will move through the courts over a period of time. The process can take anywhere from a few months to a year or more.
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Initial Contact
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The process begins once you begin to miss payments. After 10 to 15 days, a late charge will be assessed. After 30 days, the bank reports the delinquency to the credit bureaus. Around this time, they will contact you to inquire as to why you missed the payment. Once the loan begins to reach 60 to 90 days of delinquency, they may give you an opportunity to work out an alternate payment structure to bring the loan current. If you can't come to an agreement, the process will move forward.
Notice of Default
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Once the bank makes the decision to move forward with foreclosure, they will file a Notice of Default with the county where the mortgage is recorded. Once this document is filed, the borrower must cure the default within five days of the intended sale of the property. The time from notice of default until the actual sale is typically 90 days.
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Notice of Sale
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If the default is not cured in the allotted time frame, a Notice of Sale will be filed with the county. The bank will set a date for the property to be sold. The bank notifies the homeowner of the impending sale via mail. On the appointed date, the property will be subject to a Sheriff's Sale or Trustee Sale. This is typically held at the county courthouse. The property is auctioned and awarded to the highest bidder. Foreclosed properties can't be financed. The amount must be paid in full within 24 to 48 hours of the sale. If no one bids on the property, ownership reverts to the bank. The property is then known as a Real Estate Owned property.
Redemption Period
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The redemption period is a time frame where you can reclaim your home even though it has been sold. To reclaim the property, you must bring the full amount due to the bank, plus late fees, attorney fees and miscellaneous collection charges. In the end, you will pay more than you owed when you began missing payments. The length of the redemption period depends on the lender and the rules of the county and state.
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