The foreclosure process varies from state to state, but in general, the same steps are taken by the lender each time a home is being foreclosed on. Understanding the foreclosure process will help homeowners see where they are in the grand scheme of things, and show them how to avoid getting caught up in the situation as best they can.
When the Foreclosure Process Starts
While foreclosure proceedings can begin after the homeowner misses one payment, it is not likely that they will. Many lenders will allow borrowers to get two months behind before they start with the phone calls, because it takes 30 days for the flags to start going up in their systems anyway. At this point, the lender may refuse to take partial payments, but will allow borrowers to become current by making two full payments.
The Types of Foreclosure
If a third payment is missed, this is when the lender starts to get a little upset at the situation and may consider taking foreclosure actions. If the foreclosure process is going to start, this is the time. There are two different methods of foreclosure: a judicial and a non-judicial method. The judicial foreclosure has to go entirely through the court system, because the lender sues the borrower over the delinquency and takes ownership of the home afterward. The non-judicial method doesn't go through the court system and is carried out solely by the lender. While all 50
states allow a judicial foreclosure process, only 29 states allow a non-judicial. In those states where both are allowed, the lender has the right to choose which path to take.
The Judicial Foreclosure Process
This process begins when the lender files a judgement. The court will then send a letter demanding a payment be made immediately, but borrowers will generally have up to 30 days to respond to the letter. When those 30 days have passed, the lender can enter a judgement against the borrower and request the house be sold on auction. Generally several months after the judgement is entered, the home is sold on auction carried out by the local Sheriff's department. When the home has been sold, the Sheriff will serve the borrowers with papers, which will require them to vacate the home immediately.
The Non-Judicial Process
With this type of foreclosure process, the lender sends a letter to the borrower demanding payment. If after the established payment period has expired the borrowers have not paid their account to current status, the lender draws up a Deed of Trust, which appoints a trustee who sells the home for the lender. The trustee sells the home at a public auction, at which point the borrowers are evicted from the home. Typically the lender must post the public auction, and these types of foreclosure are subject to judicial review to ensure everything is done within the requirements of the law.