A Quick Overview of the Foreclosure Process

Mortgage companies loan money to borrowers to finance the purchase of real estate (i.e., land, houses, condos, commercial property, etc.). Under the mortgage agreement, the borrower promises to pay that money back with interest to the lender. If the borrower fails to do that, the lender can initiate foreclosure proceedings.

Foreclosure is the legal process of a lender taking possession of a mortgaged property and selling it to recoup the outstanding debt owed on the mortgage loan. This is a lengthy process which can vary by each state’s laws, but basically follows the same path:

1.    A borrower misses 3 consecutive payments without making arrangements with the lender for modification of the repayment terms.

2.    The lender issues a notice of default and demands that the mortgage payments are brought up-to-date. This notice is typically filed with the court and becomes a matter of public record.

3.    A borrower does not bring the mortgage payments up-to-date and, in fact, misses a fourth consecutive payment.

4.    The lender initiates a foreclosure on the property and issues a notice of a foreclosure sale to the borrower.

5.    The property is auctioned off to the highest cash bidder at the foreclosure sale.

6.    Once the property is sold at auction, the borrower is evicted from the property (the eviction process varies according to state and local laws).

Again, the particular rules vary from state to state and how those rules are applied can vary from lender to lender. The key takeaway here is that a borrower may have a few months or maybe only a few weeks before they are evicted from their property once the foreclosure process begins

Additional Resources:

“Foreclosure: What it is and how it works,” Natalie Campisi, https://www.forbes.com/advisor/mortgages/foreclosure-basics/

“Missing mortgage payments: How many can I miss before foreclosure?,” Maya Dollarhide, https://www.bankrate.com/mortgages/how-many-mortgage-payments-can-i-miss/

“The 6 Phases of Foreclosure,” Carrie Pallardy, https://www.investopedia.com/financial-edge/0510/the-6-phases-of-a-foreclosure.aspx

*Disclaimer: This blog post is for informational purposes only. Nothing contained in this post shall be construed as legal advice.