The Foreclosure Process

The actual process of foreclosure is the last step in a long line of steps taken to try and help a homeowner avoid giving up their property because of lack of payment.

If a payment is missed, the lender will send a notice of failure to pay to the homeowner since there is always the chance that a misunderstanding occurred. This may include the mail being lost or a homeowner forgetting their payment due date. If the homeowner does not respond to the failure to pay notice in a timely manner, another notice will be sent out regarding failure to pay.

This phase is called a “pre-foreclosure” phase where the lender tries to work with the homeowner in order to recoup unpaid monthly payments and late fees. During this process, if a homeowner contacts the lender and lets them know that they are no longer capable of making their monthly payments, the lender may be willing to work with the homeowner to keep them from losing their home or being foreclosed on.

Possible options include a pre-foreclosure sale of the home, where the homeowner tries to sell the house in order to pay off their debt to the lender. Some lenders will also be willing to work with homeowners to set up a different payment plan where the monthly fee is reduced to help accommodate the owner’s inability to pay.

Unfortunately, many homeowners that are unable to pay bills do not consider the option of dealing with the lender directly, so they end up faced with the foreclosure process. Once a designated amount of time has passed without the homeowner contacting the lender or trying to make payments to keep the home, many lenders will then begin to demand payment of the mortgage in full. This is called the acceleration clause. Of course this usually exacerbates a situation, since a homeowner that cannot pay a monthly payment will likely be unable to pay the full mortgage without another loan of some sort.

If the lending institution still does not receive payment, they will then send a certified letter of foreclosure. Often this will be served by the local sheriff’s office. At this point, a public notice will also be made available regarding the auction of the property.

There is still a slim opportunity to work with the lender at this point, but most often once an auction is set in place a court date will also be set. This court session will require that the lender and the homeowner be present. At this time an official order of foreclosure will be placed on the home. The home no longer belongs to the homeowner at this point, but to the bank, meaning a homeowner will have to move out immediately.

From here the home will be sold at an auction sale. If no one purchases the home during an auction sale, the bank will then post it available for purchase for a reduced price “as is” with the bank acting as the selling agent.