No One Ever Buys a Home Expecting One Day They’ll Have to Foreclose On It. Here’s Everything You Need to Know, To Stop Foreclosure

The home foreclosure process is a process that allows a lender to recover money that was lost by a homeowner not paying back their debt by their lender. The bank recovers this money by taking repossession of the home. This process begins when the borrower defaults on their mortgage payments. There are only a few endings to foreclosure. Read: How to Avoid Foreclosure.

Either the borrower pays off their missed payments during pre-foreclosure, the borrower sells the house to a 3rd party, a 3rd party buys the property at an auction; or, the bank re-posesses the house and sells it on the market

Foreclosure timeline

Late & missing payments. The bank is going to take many attempts to handle it with the homeowner. If the homeowner does not cooperate, or ignores all of their phone calls, the next thing they’ll be doing is calling an attorney. This attorney is going to call the homeowner to try to resolve the problem. See: How to Keep Your Home.

If the homeowner still continues to ignore contact, the attorney is going to file a lawsuit, letting the public know that the home is pending foreclosure. The reason this is done is to prove that the owner has defaulted on the mortgage, that way they can get permission from the judge to continue the foreclosure process. 

Pre-foreclosure. When a homeowner has missed three months worth of payments, and ignored the lawsuit letter, a notice-of-default letter will be mailed to them from their lender. This notice gives the homeowner instructions of what they have to pay to them, as well as the deadline that they have to pay it by. This deadline is not a joke. It must be paid by then. See: 8 Tips for Choosing a Foreclosure Attorney.

Auction. If the homeowner still hasn’t paid by pre-foreclosure, the property is going to be sold at an auction, which is held publicly. The lender will set a bid (usually a minimum) which equals the amount owed on the property, as well as any fees to the lender. Read: Find Local Foreclosure Attorneys.

Post-foreclosure. If a 3rd party didn’t purchase the house at the foreclosure auction, the lender is going to take ownership of it. At this point, the home is bank-owned property. These types of homes are either then listed on the open market by a real estate agent, or, the lender will sell the it in an auction house at a convention center.

The only way to exit foreclosure

Foreclosure can only end if the owner catches up on missed mortgage payments, they get a loan modification to lower their mortgage payments, the owner sells the property for less than what is owed on the loan (short sale), or, a deed in lieu of foreclosure

2 thoughts on “No One Ever Buys a Home Expecting One Day They’ll Have to Foreclose On It. Here’s Everything You Need to Know, To Stop Foreclosure

  • January 7, 2016 at 10:24 am

    I am having a hard time making my mortgage payments are there options?

  • January 7, 2016 at 10:27 am

    Contact the servicer or mortgage holder right away to see if they can offer any solutions. Your servicer is the company that collects your monthly mortgage payment. You can find their phone number on your mortgage bill.

    Start a file for records relating to your home. Keep it in a safe place where you will be able to find it easily. Keep good notes of all the contacts you make, including the dates and what you were told. Having good records is important.

    Pay high priority bills first. See our suggestions on bills to pay first and tips to possibly increase your income. Focus on an affordable outcome. A solution that is not affordable will leave you facing trouble again in the future. Here are some options:

    The bank agrees that for a limited period of time it will accept a lower monthly payment or no monthly payment. At the end of the forbearance agreement you must bring the account current. But you might have to make larger payments later on. Make sure you can afford a forbearance agreement before you agree to it.

    Temporary Interest Rate Reduction:
    A temporary reduction in the interest rate may be enough to lower your payments for the short term until you are able to recover from your financial trouble. This plan might work if, for example, your company temporarily reduced work hours and there is a plan to increase the hours in the future or if you received a temporary leave from work. A temporary reduction won’t work if the long term payment won’t be affordable later or if there is no realistic plan to increase your income.

    A modification is a permanent change in the terms of your loan. Possible changes include reducing the interest rate, extending the term of the mortgage, adding the arrears to the unpaid principal balance of your loan, or even a principal forbearance. A principal forebearance reduces your payment by turning part of the loan into a lump sum you will have to pay at the end of the loan term.

    Several programs exist that may allow you to refinance your loan under certain circumstances where you are still current on your mortgage.


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