How Foreclosures Work
How Foreclosures Work
Foreclosure is a frightening reality for homeowners across the nation. Eviction notices nailed to front doors post-foreclosure became common “Main Street” landscaping. The issue for many homeowners facing foreclosure even today is not having a firm understanding of the process. Despite foreclosure laws varying from one state to the next, most foreclosure processes follow the same nexus.
Non-Judicial Foreclosures vs. Judicial Foreclosures
A foreclosure filing is classified either as judicial or non-judicial. The classification is based on the wording in the homeowner’s deed of trust, in tandem with state laws.
The deed of trust is a document every homeowner receives at closing and is also kept on file with the county recorder’s office. This document holds the key for specification regarding the rules of engagement for foreclosure proceedings.
Most states provide lenders the option for non-judicial foreclosures, allowing the foreclosure filing to proceed without court involvement. Only a handful of states have laws requiring judicial foreclosures, meaning that a lender must obtain a court order before proceeding.
The good news for homeowners living in judicial foreclosure states is that they have more options to stop a foreclosure, in comparison to homeowners in states allowing non-judicial foreclosures. Those concerned with foreclosure filings should consult with a Department of Housing and Urban Development (HUD) counselor to review their deed of trust. Access to HUD counselors is free and local offices can be found at the U.S Department of Housing and Urban Development’s website: http://portal.hud.gov/hudportal/HUD
Timeline
The timeline for either judicial or non-judicial foreclosures is relatively similar from one state to another, and the clock begins ticking with the first late or missed mortgage payment, accelerating from there.
31 – 90 days late
The lender sends a notice of default to the homeowner via U.S. mail. This notice serves as the formal first step in the foreclosure process. This late payment notice is not to be taken lightly as it provides information to help the homeowner remedy his default in addition to providing telephone numbers for HUD counseling offices. Essentially, the notice of default is the way a lender gets their point across about the severity of the situation, while letting the borrower know that they are willing to work with them. It is now that the borrower should take measures to communicate his situation with the lender in order to stop the foreclosure process.
90 – 180 days late
After the lender has sent repeated default notices, the process becomes more serious. At this point, the lender will send a notice of intent to accelerate via certified mail to the borrower. This notice serves as the final notice before a foreclosure notice, calling the entire balance of the mortgage due. For example, if a homeowner is 180 days late on his payment, and his mortgage balance is $200,000, the bank is requiring a payment of $200,000 to remedy the foreclosure, instead of just the monthly payment arrearage.
The intent to accelerate notice gives the borrower a final “last chance” amount required to stop the foreclosure, which will be the sum of all late mortgage payments, fees and late charges in most cases. Shortly after the borrower receipts the notice of intent to accelerate, the lender will send an appraiser to the property to evaluate whether the property is owner occupied or is abandoned and assess its value for auction.
180 days or more
The borrower can expect to receive the foreclosure notice at any time after making no payment arrangement with his mortgage company at this stage of the process. The foreclosure notice will be sent either by certified mail or delivered be a county process server. This notice lists the auction date and serves as the final notice to the homeowner before eviction. The homeowner is clearly instructed to vacate the premises on or before the auction date.
After the auction
Once the auction is over, the house is then the property of the lender or the winning bidder. If the homeowner is still living in the property, he is served with an eviction notice anywhere from a few days to a few weeks after the auction conclusion. If he refuses to vacate, he is forcibly removed by local law enforcement, all of his personal possessions are taken from the property and placed on the curb.
Conclusion
Foreclosures are a terrifying experience. Being familiar with the process is crucial for homeowners in order to prevent the loss of a home. Homeowners that are struggling to pay a mortgage should communicate with lenders and seek counseling from the Department of Housing and Urban Development before the first missed mortgage payment. Waiting any longer jeopardizes any situation.