Steps Involved in Foreclosure
The foreclosure process is the unfortunate result of an extended default on a mortgage loan. Lenders foreclose on mortgaged properties and resell them to recoup their investments. Homeowners have a range of options available to them to avoid or delay the foreclosure process. Understanding the steps involved in foreclosure can help you to navigate the challenging legal issues involved.
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Default
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Every foreclosure begins with a default. While all subsequent steps in the foreclosure process are initiated by the lender, this first step is initiated by the borrower. A default can arise if either party to the agreement fails to make arrangements for special circumstances. As a borrower, always try to work out alternative payment arrangements with your mortgage lender before simply discontinuing payments. As a lender, work with your borrowers as much as possible to resolve issues and avoid foreclosure.
Notice of Default
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After a borrower sits in default for a period of time, the lender must post a notice of default on the borrower's premises, as well as filing a notice with the County Clerk's office. A notice of default spells out the terms of the mortgage agreement that have been breached, how much is owed in back payments and what the lender intends to do if the default remains unaddressed. It is customary to post several consecutive notices, as well as attempting to contact the borrower via phone, before moving on to the next step. If you receive a notice of default, contact your lender right away and try to make arrangements to handle the debt.
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Notice of Sale
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After posting several notices of default, the next step is to arrange for a formal foreclosure auction of the property. The lender must post notice of the impending sale on the premises, listing the date and time of the sale and requesting the occupant to vacate the premises immediately. At this point, the lender has the right to request police assistance in removing any occupants who refuse the leave the property. Property inside the house cannot be sold at auction; if it is not removed by the borrower, the lender has the right to place it in storage, relinquishing it to the borrower after the borrower reimburses the storage fees.
Foreclosure Auction
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The foreclosure auction is the final step in the foreclosure process. Foreclosure auctions can take place in person on the premises, or bids can be placed online and over the phone. Real estate investors often look to foreclosure auctions to find low-priced, high-quality houses to resell or lease for a profit.
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