The foreclosure procedures differ from state to state, however there are some commonalities which can be discussed. Foreclosure is the process by which a lender regains ownership of your property after you fail to make payment. This process allows the lender to recoup their loan amount through the sale of your property. One thing to keep in mind is the mortgage company isn’t going to take your home from you as soon as you miss a payment.
Your mortgage contract has typically has a grace period clause built into it giving you 10-15 days to pay past your due date penalty free. After that grace period is up the lender will typically charge you some kind of late charge. Failure to pay by the grace period, in most cases, isn’t going to affect your credit or otherwise negatively affect your finances. If you fail to pay within the first 30 days of your payment due date the delinquency will be reported to credit reporting agencies and the lender will begin to more aggressively try to collect the debt.
Usually around 90-120 days past due the mortgage company will start to consider foreclosure proceedings. This time frame has been stretched out during the current economic situation so it may take longer for your bank to actually start the foreclosure process. When the bank has decided to start the foreclosure process they will issue you a “Demand Letter.” The demand letter will state the amount your are delinquent and advise you you have 30 days to bring your account current or make arrangements to bring your account current. Typically the company will require you to pay it completely current once they have issued the demand letter.
If you fail to make arrangements your account will be handed over to the lenders attorney’s to be processed for foreclosure. Specific laws vary by state but typically they will make arrangements with the sheriff and the county for a foreclosure sale. A notice will be posted on your property and in some cases in the newspaper. Auctions typically occur on the steps of your county courthouse. If you are still living in the home the lender or purchaser will have to go through your states eviction process to have you forcibly removed from the home. Typically a Sheriff’s deputy will come to your door and require you to vacate the premises immediately.
If your home is in the foreclosure process and you manage to bring it current you are going to be liable for the legal fees the bank incurred up to the point where you brought it current. This amount is usually in the thousands of dollars. Their attorney’s have to be paid for the work they did to process the foreclosure and the bank will expect you to pay it. This is a good reason to keep in contact with the bank and make arrangements to avoid the foreclosure process from being started.
A couple of things to keep in mind, the bank DOES NOT want your home back. They don’t want to go through the hassle and pay the legal fees to foreclose and evict you from your home. Your best bet is to keep in constant contact with your mortgage company and keep the apprised of your current situation. There is a house across the street from me that has been vacant now for over a year. The owner has not made any payments during that time and the house still has not been foreclosed on. My second point is to not move out of the house until you are forced to move out. If the guy across the street from me was living in the home all this time he would have been able to live and just be paying utilities.
Additional References on Foreclosure
Foreclosure Law by State (http://www.foreclosurelaw.org/ )
Housing and Urban Development (http://www.hud.gov/foreclosure/index.cfm)
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