Some people get the mortgage foreclosure process and the tax foreclosure process mixed up. The mortgage foreclosure process is more common and it happens all year round whereas the tax foreclosure process is usually once a year. When people fail to pay their mortgage payments, the lender will initiate the mortgage foreclosure process to take their homes away.
The mortgage foreclosure process is long and involved. Different states have different foreclosure rules and slightly different mortgage foreclosure process. Lenders seeking to foreclose have to comply with state’s mortgage foreclosure process which can be costly and time consuming.
The first step of the mortgage foreclosure process is when a homeowner cannot pay his or her mortgage payments. Banks often wait a few months before they take any actions. Banks will send letters asking the homeowner to pay or even negotiate a payment plan. If the homeowner cannot pay for three consecutive months, then the mortgage account would be in default.
When the account is in default, the next step of the mortgage foreclosure process is the notice of default. The homeowner is not in foreclosure yet but the notice of default is the first real evidence of the mortgage foreclosure process.
The notice of default often accompanies the notice of trustee’s sale and they are served to the homeowners. In some states, these notices are mailed by certified mail and in others, although more rare, they are served by the Sheriff.
Sometimes the lender will also put the foreclosure sign up infront of the home that is being foreclosed on. This part of the mortgage foreclosure process is the worst for homeowners because friends and neightbors can see that they are in foreclosure and it is embarrassing.
Before the auction date or the date of foreclosure sale, the homeowner can still pay off the mortgage balance in full and the mortgage foreclosure process will cease. But, most people cannot find enough money to pay off the mortgage balance. Sometimes, there are loans to stop foreclosure but they are rare nowadays. The last chance the homeowner has to get the home back is about six days before the sale.
The foreclosure auction is the last step of the mortgage foreclosure process and it is when the lender auctions off the foreclosed property to the highest bidder. Some of the bidders are new homeowners looking to buy cheap homes or real estate investors looking to buy cheap investment homes. The auction price is usually low, sometimes much lower than the market value of the home.