Some people get the mortgage foreclosure process and the tax foreclosure process mixed up. The mortgage foreclosure process is more common and it happens all year round whereas the tax foreclosure process is usually once a year. When people fail to pay their mortgage payments, the lender will initiate the mortgage foreclosure process to take their homes away.
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.
The first step of the mortgage foreclosure process is when a homeowner cannot pay his or her mortgage payments. Banks often wait a few months before they take any actions. Banks will send letters asking the homeowner to pay or even negotiate a payment plan. If the homeowner cannot pay for three consecutive months, then the mortgage account would be in default.
The next step in the mortgage foreclosure process is the notice of default or even a letter threatening foreclosure. Once the account is in default, the lender will send a letter of default to the borrower. This is a scary time but the lenders are still open for negotiation 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.
It is also not strange for a lender to post a sign outside a foreclosure home. This is the most embarrassing step of the mortgage foreclosure process for the homeowner because anyone can now see that the home is being foreclosed on. There may be many people driving by the home to see if is is a good investment property for them to bid on at the foreclosure auction sale.
Before the auction date or the date of foreclosure sale, the homeowner can still pay off the mortgage balance in full and the mortgage foreclosure process will cease. But, most people cannot find enough money to pay off the mortgage balance. Sometimes, there are loans to stop foreclosure but they are rare nowadays. The last chance the homeowner has to get the home back is about six days before the sale.
When the day of the trustee’s foreclosure sale arrives, the lender will auction off the foreclosed home to the highest bidder. This is the final stage of the mortgage foreclosure process when the lender can finally get rid of the property and get some of the money back. Highest bidders are often people looking for cheap homes to fix or move into. Many of them are real estate investors.
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