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Your mortgage payment is likely to be due on the first of the month. The payment due date is also attached to a 15-day grace period. You will be responsible for paying late fees if the lender has not received the full mortgage payment by the time the grace period expires. At that time, you can expect to receive phone calls from lender representatives seeking an explanation for the missed payment. After one month of missed payments, the mortgage falls into default and the mortgage foreclosure process begins. The mortgage default will appear on your credit report.
In the pre-foreclosure stage, your mortgage has fallen into default but your home has yet to be seized and auctioned off. Communications with the lender will increase -- in the form of telephone calls and notice of default and demand letters. With every communication, lender representatives will demand that payments be made to immediately bring your mortgage current. As a distressed homeowner, you may sell your home in pre-foreclosure to raise cash to pay off the bank. A short sale is a possibility if you owe more on the home than it is actually worth. In a short sale, the lender must agree to accept less money than its outstanding mortgage balance
due. In pre-foreclosure, a home may sell at a 10 percent discount off market value. The pre-foreclosure stage typically lasts five months.
Foreclosure begins after 6 months or 180 days of missed mortgage payments. If no deal can be worked out in pre-foreclosure, your bank carries the right to auction the home to recoup the loaned money. When the pre-foreclosure period expires, the bank will post a notice of foreclosure sale in the local newspaper to announce a time and date for the auction. The auction date may fall within 30 days of the newspaper notice. At the foreclosure auction, the property may sell for 20 to 40 percent discounts off market value. If a deal closes at auction, the home’s new owner may ask that you leave the premises. If you refuse to comply, the local sheriff can use force to remove you.
Real Estate Owned (REO) Stage
The bank recovers the home as "real estate owned" when no deal materializes at auction. The bank will then market the home to prospective buyers who can expect 10 to 20 percent savings off market value. Be advised that the lender carries rights to evict you from the property that it now owns--even when a buyer has not yet emerged to purchase the home.