Foreclosure is a legal process that occurs when a borrower is unable to make their mortgage payments and the lender takes possession of the property. It is a last resort for lenders, as it involves selling the property in order to recoup the unpaid loan amount.
Here is a step-by-step breakdown of the foreclosure process:
Missed mortgage payments: Foreclosure begins when a borrower misses one or more mortgage payments. The lender will usually send a notice to the borrower, stating that the loan is in default and outlining the steps that need to be taken to bring the loan current.
Demand letter: If the borrower is unable to bring the loan current, the lender may send a demand letter, which gives the borrower a certain amount of time to pay the past-due amount in full. If the borrower is unable to do so, the lender can proceed with the foreclosure process.
Notice of default: If the borrower is unable to pay the past-due amount, the lender will file a notice of default with the county where the property is located. This notice is typically published in a local newspaper and serves as a public notice of the borrower’s default.
Auction: After the notice of default has been filed, the property will be scheduled for a public auction. At the auction, the property is sold to the highest bidder. If the property does not sell at the auction, it becomes a bank-owned property, also known as a real estate owned (REO) property.
Eviction: If the borrower is still living in the property after it has been sold at auction, the new owner can file an eviction action to have the borrower removed from the property.
It’s important to note that the foreclosure process can vary slightly from state to state, as different states have different laws governing the process. If you are facing foreclosure, it is important to seek the advice of a qualified attorney who can help you understand your rights and options.