Mortgage Foreclosure Process Explained
The mortgage foreclosure process is different from the tax foreclosure process but is the more common one. When people are in foreclosure because they fail to pay their mortgage payments, the bank will foreclose on their home and the mortgage foreclosure process will begin.
A mortgage foreclosure process can be lengthy and a headache for both the homeowner in foreclosure and also the bank. This is why many banks are willing to consider all reasonable offers to avoid having to go through with the mortgage foreclosure process. Banks have to comply with state laws on foreclosure when foreclosing.
The first step of the mortgage foreclosure process is when a homeowner cannot pay his or her mortgage payments. Banks often wait a few months before they take any actions. Banks will send letters asking the homeowner to pay or even negotiate a payment plan. If the homeowner cannot pay for three consecutive months, then the mortgage account would be in default.
The next step in the mortgage foreclosure process is the notice of default or even a letter threatening foreclosure. Once the account is in default, the lender will send a letter of default to the borrower. This is a scary time but the lenders are still open for negotiation at this point.
About three months into the mortgage foreclosure process, if a payment plan cannot be reached between the lender and the homeowner, then the lender will send a notice of foreclosure and perhaps also the notice of trustee’s sale depending on state law. These notices are often served to the homeowner by certified mail or in person by the Sheriff. Public notices are also posted and you will get calls and people coming by trying to see if your home would be a good investment.
It is also not strange for a lender to post a sign outside a foreclosure home. This is the most embarrassing step of the mortgage foreclosure process for the homeowner because anyone can now see that the home is being foreclosed on. There may be many people driving by the home to see if is is a good investment property for them to bid on at the foreclosure auction sale.
The homeowner usually has few chances to pay off the mortgage balance and get the home back in his or her name. However, most people in foreclosure cannot find money to pay off the bank and getting a new loan can only lead to more problems. The last day a homeowner can reclaim the home is about six days before the foreclosure auction.
The foreclosure auction is the last step of the mortgage foreclosure process and it is when the lender auctions off the foreclosed property to the highest bidder. Some of the bidders are new homeowners looking to buy cheap homes or real estate investors looking to buy cheap investment homes. The auction price is usually low, sometimes much lower than the market value of the home.