Foreclosure

What is a Foreclosure?

A foreclosure is a process by which a homeowner's rights to a property are forfeited because of failure to pay the mortgage. If the owner cannot pay off the outstanding debt or sell it via short sale, the property then goes through a foreclosure process that could end in an auction of the property. If at the time the property doesn't sell it goes back to the lending institute.

What are the stages of foreclosure:

Missed Mortgage Payments

Stage 1: Missed payments

Foreclosure is a lengthy process, with specifics varying from state to state, but it all starts when a borrower fails to make timely mortgage payments.  This is usually due to hardships such as unemployment, divorce, death or medical challenges.  Other times, a borrower may decide to stop paying the mortgage intentionally because the property might be underwater (mortgage exceeds the value of the home) or because he's tired of managing the property.  For whatever reason, he can't or won't meet the terms of the loan.

 

Notice of Default, Pre-Foreclosure, Foreclosure

 Stage 2: Public Notice (Notice of Default), (Lis Pendis)

After three to six months of missed payments, the lender records a public notice with the County Recorder's Office, indicating the borrower has defaulted on this mortgage.  In some states, this is called a Notice of Default, in others it is a Lis Pendens - Latin for lawsuit pending.  Depending on state laws, the lender might be required to post the notice on the front door of your property.  This official notice is intended to make the borrower aware he is in danger of losing all his/her rights to the property and may be evicted from property.

 

Short sale, keys for cash, refinance

 Stage 3: Pre-Foreclosure

After receiving the notice of Default from the lender, the borrower has a grace period known as Pre-foreclosure. During this time, which is anywhere from 30-120 days, depending on location, the borrower can work out some kind of arrangement  with the lender such as short sale, refinance or cash for keys, loan modification, etc. If the borrower pays off the debt or outstanding balance foreclosure ends and the borrower avoids home eviction. If the debt is not paid foreclosure continues to the next stage.

Auction, Home, For Sale, Sold

Stage 4:

If the default is not remedied by the prescribed deadline, the lender or its representatives (referred to as the trustee) sets a date for the home to be sold at a foreclosure auction, sometimes referred to as a trustee sale. The notice is filed with the County Recorder office with notifications delivered to borrower.


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