Debt Free

Mortgage foreclosure rates have risen to record numbers in many areas of the United States in the last year. Foreclosures have touched the lives of many people, and it isn't a pleasant experience. Many people have questions about the mortgage foreclosure process, especially if they're afraid a foreclosure may be in their future. Hopefully I can clear up some of the confusion. Here is how the foreclosure process works:

A foreclosure is a proceeding that occurs when a mortgage loan is in default. Default means that the lender hasn't received a payment on the loan for a specified time period, usually 30 days after the payment due date. Typically the borrower will be assessed a late fee after the first 16 days with no payment, but the loan will not actually be declared in default until the 30 day mark has been reached.

The First 30 Days of the Foreclosure Process
Once the mortgage is in default the lender will make attempts to collect the past due balance, normally by initiating a series of phone calls to the borrower. You will also get one or more late payment notices sent by mail from your lender. Be aware that as soon as the 30 day period is reached and collection proceedings begin the lender will begin to assess additional fees and charges for collection and legal proceedings. This means that not only will you owe the past due balance on your mortgage, you will also have to contend with late fees, collection charges, and possible legal bills.

The Second 30 Days of the Foreclosure Process
The second 30 days with no payments received is where the foreclosure process begins in earnest. The lender will send a formal notice of default. This is usually done by certified mail. The notice of default will demand payment in full for the amount the loan is in arrears and any outstanding fees and other charges. There will be a specified time period by which the mortgage must be made current. Some lenders will accept partial payments, while others will demand payment in full. Many mortgages have an acceleration clause that allows the lender to demand full payment once a certain number of payments have been missed or amount time has passed with no payment being received.

This is when the lender will pass the defaulted mortgage from their collection department to their legal department. This means that you will owe even more fees before your mortgage will be considered current again. The purpose of sending the defaulted mortgage to the legal department is so that formal foreclosure proceedings can begin.

The Third 30 Days of the Foreclosure Process
The lender's legal department will forward the information associated with your mortgage to an attorney that will begin the actual legal foreclosure proceedings. Specific things must happen once this stage is reached. A notice of the impending foreclosure must be advertised in a public place, such as a local newspaper. You will get a Notice of Intent to Foreclose by certified mail.

There will be a court hearing to determine the validity of the lender's claim of non-payment. If their claim is upheld by the court, the lender will be permitted to foreclose on the property. A date for the foreclosure auction is set. At this point in the process another notice will be advertised, this one of the actual foreclosure sale of the property.

It is important to realize that you are not legally compelled to move out of your house at any point in the foreclosure process. Only after the property has been sold at auction will you receive a formal notice of eviction. This notice is normally sent within 72 hours after the sale. If you fail to abide by the notice, you can be forcibly evicted by the sheriff's department. In some cases the new owner will allow you to pay rent in order to remain in the home for a longer period of time. If you fail to move, eventually the sheriff will evict you by force and you can be arrested. This can take 6 – 10 weeks from the time you are sent the formal eviction notice, but in some locations can be as little as 1 week. Normally the new owner must go in front of a judge to actually have you evicted from his new house, but you can appeal the decision, granting you even more time.

The most important thing you can do to avoid such unpleasantnesses is to never let it get this far. Do not ignore the lender's communications. They will have little to gain from beginning the foreclosure process against you. They're a lender, not a real estate company. See my previous post on how to avoid foreclosure for more on how to keep your home.