FORECLOSURE PROCESS

Written By Jennifer Wilson

The Foreclosure process varies by state and you should always seek appropriate council to understand the complete process in your state. I wanted to touch briefly on the general process. Again this can vary depending on where you reside.

Step 1 – Payment default –

This is when a borrower has missed at lease one mortgage payment. This timeframe can vary by lender but this is a general rule. Most lenders do offer a grace period and that should be confirmed by the lender. The lender typically will call your after a first and second missed payment. Usually after 3 missed payments, the lender will send out a demand letter stating the amount in delinquency and that timeframe the amount needs to be make current.

Step 2- Filing a Notice of Default

This Notice of Default (NOD) is usually sent after the 4th missed payment. This is a public noticed that gives the borrowers 30 days to remedy the past due payments before formally starting the foreclosure process. This usually isn’t filed until at least 90 days have passed since the last received payment.

Step 3 – Trustee Sale

This varies by state. In some states a nonjudicial foreclosure can be done that only requires filing paperwork with the necessary court to start the process. In some state this can move rather quickly and in others can take a bit longer requiring court approval for each step. A notice of trustee’s sale is recorded in the county where the property is located. This states a specific location and time the property will be for sale and a minimum opening bid. The property is advertised for a specific amount of time before the auction. The borrower can still make payment arrangements.

The property is placed for public action and will be awarded to the highest bidder. The lender (or firm representing the lender) will calculate the opening bid based on value of the outstanding loan and any liens attached to the property. Once confirmed, a trustee’s deed upon sale will be provided to the winning bidder. The property is then owned by the purchases who gets immediate possession and anything that is in the property.

Step 4 – Real Estate Owned( REO)

If the property is not sold during the public auction, the lender will become the owner and attempt to sell the property through a REO asset manager or Real Estate Agent. These are most commonly known as Bank Owned properties. Sometimes the lender will clean out the property. including evictions of necessary, and remove any liens to market the property in a more favorable manner. Sometimes the banks will invest a minimal amount of money to rehab the property prior to putting it up for sale. On occasion, the bank will sell the home occupied and it is the responsibility of the new owner to handle the eviction.

Sometimes a bank will offer a homeowner a Deed in Lieu or a Foreclosure. This is where a property owner voluntarily relinquishes ownership to avoid foreclosure. It is less damaging than going through the foreclosure process, however, it will have an impact on your credit.

There are resources available to you to assist you if you find yourself in this scenario. Make sure to reach out to a few reliable resources and choose the best course of action for your situation.

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