The answer to the question, How does foreclosure work? depends on regulations of the state, including whether the state uses mortgages or deeds of trust to represent property ownership. In a mortgage state, foreclosure usually takes longer and the owner is more likely to be able to remain on the property longer. In a state that uses deeds of trust, foreclosure and eviction can happen more quickly.
An Overview of Foreclosure
Foreclosure generally follows a series of steps that are similar from state to state. For information on exact procedures in a particular state, contact the mortgage lender or another authority on the subject.
The main steps of the foreclosure process usually include:
1. Notice to Accelerate. When you have missed payments, the lender will issue a letter stating that you must pay all the outstanding debt in order to bring the mortgage payments up-to-date. These are usually issued after the first missed payment is sixty days overdue.
2. Demand Letter. If the lender receives no response to the notice to accelerate, the next step will likely be a demand letter. At this point, the lender has hired an attorney. The demand letter states that if payments are not met, foreclosure will begin.
3. Notice of Default. This is the paperwork the lender files with the court to initiate foreclosure. It will list all the money owed on the loan and will supply a deadline for payment, usually about twenty or thirty days after the notice is filed.
4. Notice of Sale. This notice indicates that the house will be put up for sale at a public auction or sheriff sale. The scheduled date for the sale will be listed.
Ideally, if you are going to miss a mortgage payment, you will contact your lender as soon as possible, before proceedings even move to step one in this process. Negotiating with the lender is the best way to avoid losing your home in times of extenuating financial circumstances. Then the question, How does foreclosure work? will never have to be answered.