Even though the foreclosure process may vary from state to state, there is still a similar time line of events that take place prior to a final sale of a home in foreclosure auction.
The Home Affordable Modification Program has extended this process out a little by allowing homeowners the opportunity to have enough time to work out an affordable solution with their current lender so that everyone can avoid a costly foreclosure.
I’ve written this article as a quick reference for the person who is potentially facing being in foreclosure.
Please keep in mind that this article is just a reference and you should seek the counsel of an attorney affiliated modification company for specific instructions on how to avoid foreclosure.
Foreclosure Process Time lines
Even though foreclosure proceedings technically can start after the first payment is missed, most banks will allow a grace period of up to 29 days before they report your payment history to the credit bureaus and start escalating things to the next level.
At 90 days behind, the bank will start the actual foreclosure process by either a judicial sale sale power of sale. The main difference is that a judicial sale involves the courts and the power of sale can be handled directly by the mortgage holder.
On average the foreclosure process takes around 6 months to complete. After a property owner has officially defaulted on a loan, the foreclosure process can be as brief as two months in states following nonjudicial foreclosure processes, or more than a year in states utilizing judicial foreclosure methods.
For a detailed list of foreclosure laws by state, check out ForeclosureLaw.org.
Pre-Foreclosure
After one or two missed mortgage payments (30 to 60 days), a property is considered to be in pre-foreclosure. Lenders may issue a Demand Letter and request complete and immediate payment of the loan, plus late charges, penalties, and legal fees. If the homeowner doesn’t pay the debt in full within 30 days, the foreclosure process moves forward in earnest.
Notice of Default
Once the mortgage payments have gone a total of 90 days late, the bank, an attorney, or sheriff will issue a Notice of Default(NOD) in the form of a certified letter to the homeowner. The NOD outlines the terms of the homeowner’s responsibility to repay the debt as well as offering any possible solutions for reinstatement of the loan.
At that same time, a notice of foreclosure is recorded with a local government agency, the debt is publicly announced in a local newspaper, and a date selected for a foreclosure auction. Issuance of the NOD also triggers opportunities for investors and homeowners to negotiate short sales, which is why the mail, phone, and door solicitations start rolling in.
The Auction
The goal of this part of the foreclosure process is simple: recover the lender’s losses. The opening bid is named by the lender initiating the foreclosure process. After bidding is complete, a purchase contract is issued to the highest bidder. If no bids are received higher than the opening bid, the lender purchases the property and puts it back on the market as bank owned real estate (REO).
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