What Happens When a Bank Forecloses On a
Mortgage

What happens when a bank forecloses on a mortgage? The process of foreclosure can be short or lengthy and sometimes stopped if homeowners catch up on their loans.

Stop the Foreclosure Process

John Cancro, a Realtor in New Mexico, walks us through the foreclosure process:

• Pre-foreclosure – You should consider yourself to be in pre-foreclosure when you begin to miss mortgage payments. At this stage, your lender will contact you by certified mail, emails, and telephone calls. Ignoring the calls or letters is not the best idea. "If you think you’re in trouble," Cancro said, "call your lender and explain your situation. See if you can work something out."
• Calling in the Note – Most lenders will start the foreclosure process if you miss three consecutive mortgage payments without contacting them or ignoring their correspondence. "At this stage the lender can demand full payment, but you can still try and work with them," advises Cancro. "They would rather work with you and make money from your mortgage than take your house and let it sit on the market."
• Formal Foreclosure – If you don’t try and work with your lender, the formal foreclosure will begin. Your lender will send you a certified letter to let you know they will be following the legal process through the court system to repossess your home. The hearing date will depend upon the court but once the court issues a foreclosure order, the lender can begin the selling process of your home.
• Legal Notices – Lenders publish foreclosure notices in the paper advising the public of the repossession and sale of your home. Interested parties will bid on your home and the highest bidder will own your home. The new owner must evict you if you’re still in the home. Usually, a local sheriff’s office will help the new owner with the eviction process.

John Cancro suggests not waiting until the last minute. "As soon as you get your first correspondence from your lender, call them." Here are more tips from Mr. Cancro:

1. Mortgage Agreement – Read your mortgage agreement, especially the sections that pertain to the foreclosure process. Make sure you understand both the lender and borrower rights if foreclosure occurs. Every loan agreement outlines the foreclosure process.
2. Dates and Timelines – When you first receive correspondence from your lender they will outline dates and timelines on how they plan to proceed with the foreclosure process. Pay attention to these dates and timelines. If you can, try to make even a partial payment.
3. Lender Obligations – No lender wants to foreclose on a home, but financial institutions do have investors and stockholders who want to make profits. Unpaid mortgages can decrease profits so lenders do have an obligation to their stockholders.
4. Refinance – Even if you are in the foreclosure process, you may still qualify for a new loan to refinance your home. Talk to your lender, they may help you obtain a new loan. If not, most lenders can direct you to mortgage lenders that specialize in helping consumers in foreclosure.
5. Seek Professional Advice – "No two foreclosures or lenders are the same, nor do they have the exact same foreclosure process," Cancro states. "If you’re unsuccessful talking to your lender to work out an agreement, seek the advice of a real estate attorney."

Be clear on what happens when a bank forecloses on a mortgage. If you find yourself having trouble making payments, the first thing you should do is read your loan agreement. The second thing should be to contact your lender. Ignoring your lender may only accelerate the foreclosure process.

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