Explanation of the Mortgage Foreclosure Process
by Tim Sureman
The mortgage foreclosure process happens when a homeowner fails to pay his or her mortgage payments and the bank forecloses on the home. A mortgage foreclosure process is not the same as a tax foreclosure process which happens once a year. Mortgage foreclosure is a bigger problem for homeowners who cannot afford to pay their mortgages.
A mortgage foreclosure process can be lengthy and a headache for both the homeowner in foreclosure and also the bank. This is why many banks are willing to consider all reasonable offers to avoid having to go through with the mortgage foreclosure process. Banks have to comply with state laws on foreclosure when foreclosing.
For the people in foreclosure, the mortgage foreclosure process usually starts with them missing monthly payments. The lenders usually don’t threaten foreclosure until three payments have been missed. The mortgage account is considered in default at this point.
If the mortgage account is in default, then the lender will send the homeowner a notice of default. This is not a foreclosure notice but if you receive a notice of default, the next one might be a foreclosure notice. Most homeowners are scared but the lenders are often more than willing to negotiate at this point.
About three months into the mortgage foreclosure process, if a payment plan cannot be reached between the lender and the homeowner, then the lender will send a notice of foreclosure and perhaps also the notice of trustee’s sale depending on state law. These notices are often served to the homeowner by certified mail or in person by the Sheriff. Public notices are also posted and you will get calls and people coming by trying to see if your home would be a good investment.
In some states, a foreclosure sign is also posted on the property in foreclosure. This is very embarrassing for the homeowner because friends and neighbors can now see how bad the homeowner’s financial situation is. Most homeowners are too embarrassed and have moved out of their homes at this point.
The homeowner usually has few chances to pay off the mortgage balance and get the home back in his or her name. However, most people in foreclosure cannot find money to pay off the bank and getting a new loan can only lead to more problems. The last day a homeowner can reclaim the home is about six days before the foreclosure auction.
The foreclosure auction is the last step of the mortgage foreclosure process and it is when the lender auctions off the foreclosed property to the highest bidder. Some of the bidders are new homeowners looking to buy cheap homes or real estate investors looking to buy cheap investment homes. The auction price is usually low, sometimes much lower than the market value of the home.
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