How Do Foreclosures Happen?
Have you ever wondered what happens when a home owner fails to make their mortgage payments, ignores notices that their payments are behind, and doesn’t contact the lender to work something out? Well, if this happens, the lender may exercise its lien against the borrower’s home to sell the house and payoff the loan. This is a Foreclosure.
How do homeowners go from celebrating with champagne on closing day, to finding their belongings set out on the lawn? It doesn’t happen overnight. There are the steps involved:
1) Default Notice is Recorded by the Bank
This happens after the first payment is missed. Depending on the bank, it may happen after several payments are missed. However, many banks have been tightening the reins, trying to get people to act long before it’s too late.
2) Possible Opportunity to Reinstate Loan
There is a point when the homeowner can reinstate their loan. Homeowners have the power to stop the foreclosure process anywhere along the way, up until five days prior to the auction of the home. They can make their loan payments current plus pay late fees and penalties that were assessed in order to reinstated their loan.
3) Foreclosure Date is Set by the Bank
Usually this date is about 90 days after the bank sets the notice of default. The homeowner is allowed to continue living in the home until the date of foreclosure, and they can’t be evicted until this date. Also, they still have time to come up with the money to reinstate.
4) Notice of Trustee Sale
Now the bank will publish the notice, mail the homeowner a copy, and posts it on the outside of the home.
5) Home is Sold at Auction
The last step: the foreclosure auction sale. At this point, if the homeowner is still living in the home, and it’s sold at the auction, the winning bidder can have them evicted by the sheriff within 24 hours. If the house doesn’t sell, the bank may list it with a Real Estate Agent. The bank could have the homeowner evicted within 24 hours, or they may decide to let them stay until the home sells.
Lesson learned: If you miss a mortgage payment, don’t let it turn into two or three missed payments. Find the money, even if you need to borrow from family or friends!