What Can You Expect?: Understanding the Foreclosure Process

It’s every homeowner’s worst nightmare. Foreclosure is a process by which your lender will take possession of your home. Foreclosure occurs as a result of defaulting on your mortgage payments.

The foreclosure process is anything but simple, however. There are many steps to a foreclosure process, but knowing these steps could potentially help you to keep your home.

Financial difficulties are downright stressful. Especially, when your home is on the line. A foreclosure could make your financial difficulties worse, however, so it’s important to act and be knowledgable about the process.

The good news is that you have a chance to recover. While there’s no guarantee that you will be able to keep your home, the foreclosure process offers you a few opportunities to protect your credit score and your equity.

Read on to learn about the stages of the foreclosure process. Familiarize yourself with these steps so that you can know what to expect and how to intervene when necessary.

Gaining Awareness: Understanding the Foreclosure Process

Foreclosure happened to .47% of homeowners in 2018. Explore the following stages of the foreclosure process to gain insight into what actions you can take.

1. Informal Communication

The first step your lender may take after missing a payment is informally contacting you. They may attempt to call or email you notifying you of a missed payment. This communication doesn’t mean that your lender is foreclosing yet, however. 

If you’re aware that you may not be able to pay your mortgage for a number of months, then communicate with your lender. Your lender may suggest that you write a letter of hardship to prevent the foreclosure process. Keep in mind that a letter of hardship may not be approved depending on your lender’s policies and the circumstances surrounding any missed payments.

You may also want to consider hiring a foreclosure defence attorney to learn more about your options.

2. Notice of Default

The foreclosure process officially begins with a Notice of Default. You will receive a notice of default typically after missing 3 to 6 payments. However, the number of payments missed varies by state so it’s important to know your state’s foreclosure laws. 

3. Pre-Foreclosure

After receiving a Notice of Default your home is in pre-foreclosure. The pre-foreclosure period allows you to catch up on any missed payments. Lenders usually grant 90 days to get up to date on your mortgage.

You can also attempt to sell your home during pre-foreclosure. 

4. Notice of Trustee

A Notice of Trustee means that your lender is officially foreclosing on your home. They will then own your home. The Notice of Trustee or Notice of Sale will also include an auction date which is when your home will be sold.

5. Auction

On the auction date, your home will be sold to the highest bidder. The highest bidder will pay for your home in cash within 24 hours. 

Preparing for the Foreclosure Process

No one is ever truly prepared for the foreclosure process. However, it’s important to act when necessary. Especially, if you receive legal documents from lawsuits during the foreclosure process. 

States vary in foreclosure laws and processes, so it’s important to research the law in your state. Repayment and Notice of Default regulations may differ in your state as well. 

Is your home in pre-foreclosure? Check out our blog post to discover more about pre-foreclosure.