How Does Foreclosure Work

Pre-Foreclosure

The foreclosure process is triggered when you default on one or more mortgage payments. Your mortgage company will typically initiate the foreclosure process 90 to 120 days after your first missed payment.

It is essential that you contact your mortgage company before this happens to explain your current financial situation to them. Mortgage companies are just as averse to foreclosure as you are, and will often be willing to work with you to find alternate ways to prevent it. For example, they may temporarily lower your rate or allow you to skip a few payments without penalty until your financial crisis is resolved. If the matter still cannot be resolved and you still can't pay up the defaulted amount then your lender will begin the foreclosure process.

How Does Foreclosure Work in Your State?

The foreclosure laws of the state in which your property is located will determine the steps involved in the process from start to finish as well as the time period it will take for each step to be completed.

There are two types of foreclosure, which may vary from one state to the next.

• Judicial Foreclosure

This type of foreclosure process is initiated in a court of law with the lender's lawyers filing a document called Lis Pendens, which translates to "action pending."

• Non-judicial Foreclosure

This type of foreclosure begins non-judicially when the lender or the lender's trustee files and records a Notice of Default (NOD) with the county recorder's office.

The Foreclosure Timeline

Filing

1. The mortgage company will have foreclosure attorneys file a Lis Pendens or a Notice of Default (NOD) at the county court, depending on the type of foreclosure that is mandated within your state.

The attorneys will once again attempt to make payment arrangements with you on behalf of the bank. If you are still unable to get your mortgage current, the attorneys will proceed with the foreclosure process on behalf of the lending bank.

Court

2. You will receive all the necessary paperwork for the lawsuit, and will typically be required to appear before a judge in court. At the hearing you can request, and may likely be granted, additional time to try and resolve your financial situation. If you still cannot resolve it the attorneys will request to have a sheriff's sale, where your home will be auctioned off to recover some of the lender's funds.

Unfortunately, due to a lack of understanding of how foreclosure works, many homeowners do not make an appearance. The result is that the court will grant the lender a default judgment and the foreclosure process is fast-tracked to the sheriff's sale.

Public Announcement/Sheriff Sale

3. The sheriff's sale will be published prominently in a newspaper for a specified period of time. At this stage in the foreclosure process there is almost no turning back. If there is a possible resolution to your financial situation, this is the time to present it to your lender.

At the sheriff sale your property will be auctioned off with a pre-set starting bid. It will be sold to the highest bidder who may be either a third party or your own bank, which may choose to purchase it back.

Redemption Period

4. The foreclosure will now enter a redemption period. This is a period of time during which you can still buy the house back from the winning bidder. If possible, do not let your home enter the redemption period because it is near impossible to get financing to re-purchase the foreclosed property in this stage.

Eviction Process

5. The eviction process will be initiated after the redemption period. Your presence in court will once again be requested at which time you will be ordered to move out of the home by a specified date.

6. The eviction process may take anywhere from one week to a month. Three days prior to your scheduled eviction date the sheriff will post a prominent notice at your property. On the actual day, the sheriff will show up - and if you haven't moved out yet - will remove you from the property.

Keeping Your Home

The process of foreclosure in each state is designed to give you every possible opportunity to stop the foreclosure of your home. While you may not always find the financial resources to take advantage of the opportunity, the foreclosure process serves as a roadmap that you can use to evaluate the options available to you. It is essential to thoroughly familiarize yourself with the foreclosure process, laws, and statutes in your state.