A foreclosure happens when a property owner does not pay the principal and interest payments on their mortgage loan and the home is repossessed by the lender and sold. Foreclosure is not a quick process- several steps are taken before a home is seized and sold.
Missing a mortgage payment will cause the lender to contact you and inquire about the status of your payment. The home owner will receive letters from the lender indicating that payment has not been received and asking that payment be sent immediately. The lender will usually send these letters for a couple months.
If the mortgage is not made current within sixty days the lender will send a Notice to Accelerate. A Notice to Accelerate is a letter that lets the homeowner know that if their mortgage is not made current by a specified date the foreclosure process will begin. Once a Notice of Acceleration is sent the only way to stop the foreclosure process is by bringing the mortgage current, including any late fees that have accrued.
If the mortgage is not current by the date specified in the Notice to Accelerate the lender will notify their lawyers. The lender’s lawyer will then contact the owner with a demand notice. A demand notice is a formal notice informing the owner that the foreclosure process will be started in court if the mortgage is not made current immediately. Once a lawyer is involved the home owner will be responsible for paying attorney fees as well as past due mortgage payments.
Failure to make the mortgage loan current after a demand letter will result in the lender filing a foreclosure notice with the local court system. This notice is called a Notice of Default. After a Notice of Default is filed the home owner will have between twenty and thirty days to respond.
If the home owner does not respond to the Notice of Default within thirty days they will receive a Notice of Sale. A Notice of Sale indicates that the house is going up for auction and lists the time and date. The home owner has until five days before the sale to correct the problem by paying all late mortgage payments, all late fees, and all of the lender’s attorney fees.
A mortgage payment is usually a large part of a home owner’s budget. Falling several months behind on the mortgage can be very difficult to recover from. If a home owner is having difficulty making their mortgage payment it is important to contact the lender. Some lenders will allow the home owner to make partial payments until they can catch up. If there is no chance of catching up or if the home owner can no longer afford the house they may want to speak to the bank about a short sale. The home owner will still have to move out of the house in the case of a short sale, but a short sale is less damaging to a home owner’s credit than a foreclosure.
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