There are several steps to the foreclosure process, and it can take several months to complete. Defaulting on mortgage payments initiates the foreclosure process, which may take a variety of forms depending on the state in question. If at that point you still haven’t paid your mortgage, your lender will start foreclosure proceedings. The next step is to file for foreclosure, followed by possible court proceedings. You might be able to challenge the decision and put up resistance. Your lender may be able to foreclose on the property in other states without the involvement of the courts. The property will be sold, and you will be evicted and forced to find other housing.
If you want to protect your family and your finances from the long-term effects of foreclosure, you should familiarize yourself with the process and its various stages. And if a foreclosure does occur, find out where you may stay and seek some assistance with your money.
Foreclosure Procedures
Although each state has its own unique foreclosure procedures, here is a rough idea of what to expect:
Default and default notification
Pretrial filing and foreclosure hearing
Public Notice of Sale and Real Estate Auction
Eviction
The foreclosure process is different for each borrower. Only in jurisdictions where a foreclosure trial is mandated will a foreclosure petition and trial be required.
Inability to Pay and Default Notice
Entering into default is the first step in the foreclosure process. To most lenders, being delinquent on a mortgage payment is equivalent to defaulting on a loan.
After you’ve fallen 36 days behind on your mortgage payments, the law requires your lender to contact you. The lender has 45 days to notify you in writing of the default and explain your loss mitigation and repayment options.1
Lenders can legally begin the foreclosure process if you’ve fallen 120 days behind on your mortgage payments.2
Important
As soon as you receive a notice of default, you should get in touch with your lender or servicer to discuss your options. Possible alternatives to foreclosure include loan modifications, repayment plans, short sales, and voluntary surrender of the property.
Proceedings in a Foreclosure Case
The next step, if you live in a judicial foreclosure state, is to file for foreclosure. Lenders typically start foreclosure proceedings by serving borrowers with a “complaint.” Before filing suit, lenders in several areas must be able to show that they attempted to help you minimize losses.
You can challenge the foreclosure in court by filing a counterclaim or other defenses. If the court rules in the lender’s favor, a sale date might be set.1
Default and Sale Notice
There is no judicial oversight or a trial process in places that allow nonjudicial foreclosures. Lenders start the foreclosure process by merely issuing a “notice of intent to foreclose,” which serves as formal notice to the borrower. They’ll also need to publicize the deal for a good while before it really takes place.
Typically, the local sheriff’s office conducts the auction where the property is sold. Because of the dearth of interested buyers, banks and lenders are often compelled to repurchase the homes.
Lenders will try to sell these homes to buyers directly after taking ownership, and they will be referred to as “bank-owned properties” or “real estate-owned properties” (REOs).3 REO homes are often advertised on the websites of larger financial institutions and banks. Bank-owned and real estate owned (REO) properties can be viewed on Wells Fargo’s special website.4
Warning
The loss of your house is not the only negative consequence of a foreclosure. The foreclosure will remain on the borrower’s credit report for up to seven years, lowering the score even further.
Eviction
You are required to leave your foreclosed property immediately upon its sale. The new buyer has the right to have you forcibly removed from the property if you don’t. The legal procedure for evicting a tenant varies from one state to the next.
After Foreclosure, What Should You Do?
Going through a foreclosure is difficult, both monetarily and emotionally. You and your family are not alone if you have gone through the steps of the foreclosure process and have lost your house.
First, going through foreclosure may delay your ability to purchase a new house. A few years may pass before you hear from some lenders. Extenuating conditions might sometimes expedite the buying process. If not, you might want to consider renting until you’re in a position to buy a home again.
Try to find a new place to live before the foreclosure is finalized if you are currently experiencing this stressful situation. Because of this, you may be able to secure a rental before the foreclosure negatively affects your credit score.
If you lost your job or couldn’t afford your mortgage payments and had to foreclose, one way to start putting your finances back on track is to find a better paying job. A co-signer, who can be a member of your family or a trusted acquaintance with good credit, may also be necessary to get a mortgage after foreclosure.
Finally, it may help to discuss the foreclosure candidly with a reliable friend or family member. A lawyer should be consulted for any legal advice. Also, check with your health insurance provider to see if they cover counseling services.
Questions and Answers (FAQs)
How long before it’s impossible to stop a foreclosure?
Once a foreclosure auction has taken place, it is too late to stop the sale.1 If you can catch up on your mortgage payments in the weeks and months beforehand (often around 120 days), you may be able to prevent the foreclosure and keep your home.
How much time do you typically spend in pre-foreclosure?
About 120 days are needed to complete the pre-foreclosure process. This is due to the fact that the formal foreclosure procedure cannot begin until you are at least 120 days behind on your mortgage payments.
