The foreclosure process is frightening, but it's also straightforward. The process is governed by state laws that are designed to protect you and your lender. The laws give you time to resolve the situation that led to foreclosure and stop the process before you lose your home or property.
Non-Judicial Foreclosure Process
A non-judicial foreclosure proceeds through an orderly process from missed payments, through a notice of default, then a notice of sale, and finally a foreclosure sale. Depending on where you live, the process takes anywhere from sixty days to nineteen months.
Stage 1: Missed Payments
You'll receive a late notice after you've missed one payment. Another late notice arrives when you miss a second payment and you may also receive calls from your lender.
At this point, you can stop foreclosure by catching up with your payments. Your lender may also be willing to work with you to put the mortgage into forbearance or temporarily reduce your payments.
Stage 2: Notice of Default
Laws vary by state, but you'll generally receive a notice of default after three to six missed payments. The notice must also be filed in the county recorder's office. Some states require that the notice be published in the newspaper for three to four consecutive weeks.
The notice of default alerts you that you've entered the reinstatement period. The period varies by state, but is usually at least thirty days. During this period, you can still save your home if you can catch up on payments or come to some agreement with the lender regarding payment. You may also be able to sell your home before it goes into foreclosure. If you file for bankruptcy at this stage, it will only temporarily halt the process.
Stage 3: Notice of Sale
If you've been unable to resolve the situation, you'll next receive a notice of sale. The notice will be posted on your property, filed in the recorder's office, and published in the newspaper for three or more weeks.
In some cases, you can avoid the sale by catching up on your payments, asking the lender to accept a deed-in-lieu arrangement, selling the home, or refinancing. In most states, you must resolve the situation five to fifteen days before the sale to stop it.
Stage 4: Foreclosure Auction
A foreclosure auction is also called a trustee sale. Your home is sold to the highest bidder at the auction. If the home fails to sell, the bank will buy it and sell it through a real estate agent as a bank REO.
You can attempt to buy back your home, but you'll need to have enough cash to cover the balance of the loan, attorney's fees, and the lender's fees that are included in the auction price or selling price. You're better off attempting to pay the lender before the home goes to auction if you have the money.
Stage 5: Redemption Period
After your home has gone to auction, you enter the redemption period. The redemption period varies from zero days, meaning the state doesn't permit redemption after the sale is confirmed, to twelve months. To redeem your home, you must be able to pay off the loan and all fees within that period. Most people are unable to do this, however, and have now lost their homes.
Judicial Foreclosure Process
A judicial foreclosure follows most of the same steps as a non-judicial foreclosure, except that the lender must file a Lis Pendens asking the court to declare a foreclosure. You will receive a notice of the complaint. Once the court has declared a foreclosure, the judge will set the sale amount, including fees. Following the judgment, a writ is issued authorizing a sheriff's sale. Your home will be auctioned during the sale.
If you've received a late notice or notice of default, take action now to resolve the situation. Contacting your lender early greatly increases your chances of keeping your home.