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What is the Mortgage Foreclosure Process?
What is the Mortgage Foreclosure Process?
A foreclosures is a legal proceeding that occurs when a homeowner (mortgagor) fails to make the agreed upon mortgage payments and the holder of said mortgage (mortgagee), typically a bank, evicts the homeowner, seizes that property and sells it to another individual.
In the event a homeowner fails to pay on their mortgage, a foreclosure is the primary remedy utilized by most mortgage lenders, in most states, to collect on the debt owed to them. The house is the main collateral or asset the bank has when they issue a mortgage to an individual.
The foreclosure process starts when a homeowner falls behind 90 days on their mortgage payments (this is most typical). At that point a lender may file what is know as a Notice of Default and an Election to Sell (again, most typical).
At this point, the lender typically waits about 90 more days where it appears nothing more happens from the lender other than possibly receiving phone calls requesting that the homeowners gets caught up on their mortgage. Behind the scenes, the lender is preparing their team to initiate the actual reclaiming of the asset.
After what is a total of about 180 days of being late on the mortgage payment, the lender has the right to publish what is know as a Notice of Sale. Most states require the lender publish the tentative sale for abouts 3 weeks. When the lender publishes that Notice of Sale, it is typically in a newspaper and they have to declare when the property will goto sale on the courthouse steps or some other predetermined location.
A homeowner does carry the ability to cure the mortgage loan and keep their house, this is called the Right of Reinstatement (most state laws offer this). This means that if the homeowner can pay back all delinquent mortgage payments plus additional fees and penalties up until a predetermined time, usually 7 days before the Notice of Trustee Sale, the lender will allow them to keep their home.
The homeowner does not have to pay back the whole loan, they do not have to refinance, they simply have to pay the mortgage payments that were missed, fees and penalties.
If the homeowner is unable to execute their Right of Reinstatement or if the lender does not postpone the sale, the property will goto the Trustee Sale.
Once the Trustee Sale occurs, the property is lost.
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