Mortgage Foreclosure
The process of mortgage foreclosure has a set procedure which depends on the laws of the state or jurisdiction that you live in. These laws do vary a little bit from state to state. However, most of them follow a certain process that you will see below.
In case you do not already know, foreclosure is what happens when a person cannot pay their mortgage or other home loan. In the loan agreement, the bank always has the right to take possession of the house if the loan is not paid. Then they will sell it to make back the money that is owed to them. Because they have the house as security for the loan, they can offer lower interest rates on a mortgage than on an unsecured loan.
As soon as a person misses even one mortgage payment, the bank will be aware of it and they will begin the very early stages of the process. In the beginning, they will try to work with the home owner to get the missed payment or payments paid. The first letter in this process may arrive as soon as 2 weeks after the first missed payment was due.
After a person has missed payments for three months or more, the bank will have a lawyer file a Notice Of Default (NOD) at the County Recorder’s office. This is the official notice to the person that they are facing foreclosure proceedings and will lose their home if matters are not put right. Some lenders file this immediately at the minimum 90 days. Others wait longer, sometimes up to a year.
If the debt is not settled or payments agreed to the satisfaction of the lender within 90 days of the Notice Of Default, then a second notice giving a date for the sale will be sent. The sale is usually 15 to 30 days from the date of this second notice.
The sale notice will be filed with the County Recorder, posted on the property and published in the local newspapers. The sale is usually by auction in a Trustee Sale.
The sale itself is normally held on the steps of the courthouse in the county where the house is located. The auction will be held and the winning bidder must pay in cash. Usually, they pay a deposit right there at the auction and then the rest is due within 24 hours.
The starting price is set by the lender and usually it will be the total amount of the debt including all the interest that is due and the legal fees from the foreclosure process. So in some cases the price starts low and there may be a lot of bidders. In other cases if the price is high there may be nobody bidding. In this case the lawyers will usually take the property.
So there is a set procedure that is followed in each state and it is always possible to get an explanation of it from a lender. It should not be hard to understand. Foreclosure is a long drawn out process and most banks prefer to work with a home owner to get a payment plan set up if possible. Mortgage foreclosure is a last step that both sides usually want to avoid if they can.
