Authored by Yudi Yuviama in Real Estate
Published on 01-18-2009
The common foreclosure misconception is that, if the homeowners skip a payment or two, the lender instantly takes the property ownership and then put it on an auction at a foreclosure sale. In reality, the procedure is more protracted than that, this is a regular foreclosure scenario:
- Homeowners stop to make regular mortgage payments.
- After about fifteen to thirty days, the lender mails a payment reminder.
- If the homeowners don’t reply, the lender sends some follow-up notices and tries to contact the homeowners.
- If the homeowners still don’t accept the call, the lender hands the case over to the collection department, who persists in pestering the homeowners with mails and telephone calls.
- After about three months of skipped payments, the lender hands the case over to an outside counsel, which is usually managed regionally. The attorney mails an official warning letter about the foreclosure proceedings that are about to set out.
- If homeowners submit a solution that the lender views as satisfactory. At this stage, the homeowners may stop the foreclosure proceedings by discussing a desirable solution with the lender.
- The attorney starts the foreclosure procedure by sending a foreclosure notice to be published in the county’s local newspaper. The homeowners may still reestablish the mortgage at this stage by catching up on the monthly payments and paying up any extra late fees and penalties.
- The case reaches the civil division of the sheriff’s office, which is delegated the task of managing the sale. The attorney managing the foreclosure starts the opening bid and usually publishes it inside the foreclosure notice. The opening bid is the sum of the mortgage plus penalties, attorney fees, unpaid interest and extra costs.
- The sheriff or his deputies may check the house before the sale to put up a foreclosure notice and scrutinize the property, since occasionally redemption rights may change if the homeowners vacate the property.
- A day before the auction process, the lender can adjust the price, but he may not unnaturally inflate the price. Often, lenders lower the opening bid that can make the property more attractive to the investors.
- The property is in the auction block, purchasable to the highest bidder or is handed to a trustee to quickly liquidate the property.
- An investor buys the property at auction sale or from a trustee. But, if no one bids above the opening bid, control is turned in to the lender, who may then acquire the property possession after the redemption period.
- In certain states, the highest bidder takes property possession without any delay. In states with applied redemption period, the recent “owner” must hold off until the redemption period passes and a court hearing takes place.
- Previous owners are evicted from the property. Foreclosure is bad for both the lender and the homeowners. The homeowners lose their home and the lender loses some money on the loan and frequently must pay some extra costs.
If you or a best friend is ever facing a traumatic foreclosure, call the lender directly to explore your alternatives. Find help soon. Disgrace, wrath, and self-denial may deter you from finding help, but the longer you delay, the fewer your choices are. Prepare yourself and talk with the lender. Panicky homeowners become susceptible to foreclosure rescue scams. Study your situation and understand your options, and do not deal with any individual who is laying claim to be your buddy.