A Foreclosure: What to Expect

Foreclosure process can take months or even years to complete.

When you take out a mortgage to purchase a property, you give the lender the right to seize the property if you miss your mortgage payments. A foreclosure refers to the process by which your lender takes possession of your property and sells it to cover your outstanding loan.

Notice of Default

Your lender may contact you after you miss one or two payments to discuss your delinquency. After you miss the third payment, you lender may file a notice of default with a local courthouse. At this stage, you receive a letter demanding that you cover the delinquent amount or lose your home in a foreclosure. Depending on your lender, you may receive this letter three months to one year after your first missed payment.

Notice of Sale

From the notice of default, you have about 90 days to pay the delinquent amount and stop the foreclosure. Alternatively, you may be able to negotiate another payment schedule with your lender. The lender can schedule a foreclosure sale of your property two to three months after the notice of default. Before the sale occurs, you receive a notice of sale letter, which details the sale date. The sale date is usually 15 to 30 days after the date of the letter.

Foreclosure Sale

The notice from your lender usually states that you need to vacate your property or face eviction. If you face eviction, you may later find it difficult to rent a property to live in because landlords may view you as a risky tenant. However, if your lender is overwhelmed with the number of foreclosures in a bad housing market, your lender may delay eviction and foreclosure sale. As a result, you may be able to live in the property longer.

Taxes and Deficiency Judgment

After you move out and the lender carries out a foreclosure sale, you may have to pay taxes on the amount of debt your lender cancels because the tax authority may view the forgiven debt amount as income. Additionally, depending on your state laws and mortgage conditions, your lender may come after you demanding payment for the difference between your outstanding loan amount and the sale price of the property.

References

• "MSN Money"; Facing Foreclosure? 9 Options; Liz Pulliam Weston
• "MSN Money"; When Foreclosure Doesn't Mean Eviction; Karen Aho
• U.S. Department of Housing and Urban Development: Are You at Risk of Foreclosure and Losing Your Home?
• Internal Revenue Service: Home Foreclosure and Debt Cancellation
• "CNN Money"; You Lost Your House --- But You Still Have to Pay; Les Christie; 2010