Foreclosure is the process that allows someone who lends money, the ability to recover the amount owed on a defaulted loan, by taking ownership (by repossession) or selling of the property to secure the loan.
The foreclosure processes begin when the borrower (homeowner) defaults on mortgage payments and the lender files a public default notice. This is called a Notice of Default. At this point the foreclosure process can end in one of the following ways:
1. The borrower reinstates their loan by paying off the defaulted amount during a grace period determined by state law. The grace period is known as pre-foreclosure.
2. The borrower sells the property to another interested party during the pre-foreclosure period. This sale will allow the borrower to pay off the loan to avoid having a foreclosure on their credit history.
3. An interested party buys the property at public auction at the end of the pre-foreclosure period.
4. The lender takes over the property, usually with the intent to re-sell it on the open market. The lender can do this either through an agreement with the borrower, during pre-foreclosure or by buying the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender).
The foreclosure timeline is as follows:
1. The Pre-lien period (30 days)
2. The lien period (next 30 days)
3. Notice of Default (next 90 days)
4. Notice of Sale (next 21-25 days)
5. Trustee Sale (if unsold at this point)
6. REO (Real Estate owned by the lender)
What can I do to keep it from getting out of hand?
Keep in contact with your lender, if they understand your situation, you may get some leniency. DO NOT IGNORE contact from your lender. If you have problems making your payments, call or write to the lender's Loss Mitigation Department, as soon as, possible. Just explain what your situation is and be prepared to provide them with your financial information. You may be required to provide information like your monthly income and expenses. If you cannot provided this information, your lender may not be able to help you.
Nelson J. Flowers @ http://www.understandingforeclosure.info
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