Foreclosure…what is the process?

The word FORECLOSURE has become a word we hear everyday, whether on TV, in the paper, on the internet or at the coffee cooler, you can’t escape it.  As tough as this maybe, it is not aimed at one age group now…it is hitting everyone old, young, 1st time buyer or someone that’s been in their home for 20+ years. 

The one question that I seem to get asked a lot of times, is “HOW DOES THE ACTUAL PROCESS WORK?”  This is actually the last step the lender can take to reclaim the dollars owed to them by the homeowner.  This process starts much in the same way if you were to be late making a credit card payment.  The lender would send you a late notice payment letter in the mail and request payment from you.  Should you not make the payment or contact the lender, the lender then would send you another letter.

If the homeowner again would not try to make contact with the lender, they would then start with the full foreclosure process.  The lender can stipulate that full payment be made by the home owner immediately to stop the process.  The lender is within their full rights to demand this payment.  This demand is clearly stated in your mortgage papers. 

The home owner then becomes stuck with a number of payments: the total loan of the mortgage, behind schedule expenditure, fees of any legal matters and any penalties that were announced for being late on a payment.  Once the lender demands a full payment under the rightful clause, the home owner cannot make any small lump sum or contract scheduled payments. He or she has to pay the full amount to the bank otherwise the foreclosure process commences properly.


~ A deed of trust is secured by the property in the buyers name

~ The borrower misses their first payment

~ A late payment letter is issued to the borrower/homeowner, also maybe called a default notice. (Usually takes 90 days)

~A notice of sale is issued. (Usually takes 90 days)

~ The auction of the property then will take place and the home will be sold.

Once the auction has happened, the lender then can send a formal letter of foreclosure to the homeowner.  This is typically done by a sherif from the county in which the property is located in.  The lender must also post the sale in the local paper where the home is located and must be on record for 6 weeks.   The owner may still try to arrange a plan with the lender.  They maybe able to pay some now and more later, but it is ultimately the lenders choice if they want to work a deal at this point.  The terms of this deal, would be set completely by the lender and most lenders would not work with a bullying home owner that feels they are going to tell the lender how this deal is going to happen (so be patient, kind & tolerable with the lender to what they propose if you do want to work something out.)  At this point, a meeting is held by all parties that will be involved with the sale to set a sale date. 

Once the home is auctioned, the bank will be in charge of the disbursements of any monies collect.  The lenders will be paid off first, then if there are any monies owed for association, taxes or liens on the property those will be handled in an order & dollar amount decided upon by the court system.  If there are any monies left once all parties are paid, the home owner would then receive any remaining dollars.  However, with the market we are in and the sale amount of the homes at the auctions, I would highly recommend a home owner NOT get their hopes up of receiving any dollars back once the sale happens.

This whole process typically can take around 6 months to complete. 

THE SPIRITS TO MOVE can help if you find yourself facing tough real estate times.  We are here to help! Feel free to contact us with your questions or concerns.


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