Homeowners often assume that foreclosure is when the bank takes their home because they stopped making the required payments. But this is an oversimplification of what foreclosure is, and gives far too much of the power to the lenders. In fact, foreclosure is a legal process that occurs according to federal, state, and local laws, and homeowners have legally protected rights to defend their homes and ensure that the lender even has the right to initiate proceedings.
The foreclosure process often occurs in stages, depending on how the loan was structured and what terms the mortgage company and homeowners agreed on.
Typically, though, once homeowners begin missing payments on the loan as agreed, the lender will begin attempting to collect the late payments. The loan has not gone into foreclosure yet, but continuing delinquency will push it closer to this point.
After a period of months without a payment, the lender often send the loan to a local attorneys office to initiate the required foreclosure proceedings. These lawyers will either begin a foreclosure lawsuit (in judicial foreclosure states) or begin sending out notices of default or notices of sale (in nonjudicial states).
How foreclosure works from this point on will typically be determined by how the borrowers react. The lender will accelerate the loan, declaring all of it to be due, in order to have the house auctioned off for a higher price and eat up all of the owners’ equity in the property. But borrowers may also defend against the foreclosure by fighting the lawsuit or filing for a temporary restraining order against the lender. Either would allow the owners to remain in the property until the validity of the foreclosure can be determined.
It is when homeowners ignore the legal process that they get into the most trouble.
Too often, borrowers only work with the bank in applying for a mortgage modification or other solution to foreclosure and simply hope for the best in court. But this usually results in nothing more than the bank having a clear, easy victory and being able to proceed to the sheriff sale with no official objections from borrowers.
If the owners do not otherwise stop foreclosure, their home will be listed for sale by the county. Usually, notice of sale will be posted on the property itself, mailed to the owners, or published in the local newspaper. After an applicable redemption period after the sale (which depends on state foreclosure laws), legal ownership of the house will be transferred to the new owner. It is usually the foreclosing bank that buys the property back at auction.
But the final stage of the foreclosure process is the removal of the former owners. The new owner will often have to give notice of the eviction and may have to initiate a lawsuit in court to have the sheriff come out to the property. Eviction is usually a very quick process, though, lasting at the most a month.