Although past articles I have written have examined numerous
topics relating to foreclosures, mortgages, and real estate, one of the
few topics I have not yet touched on in a less than tangential way is
how the actual foreclosure process works, from beginning to end. This is
a very broad topic, of course, and one that is dealt with differently
in every state, but a short discussion can allow homeowners to formulate
a general idea of what to expect before, during, and after a financial
crisis that causes them to miss their mortgage payment. Without having a
general idea how how foreclosure works, homeowners will find it very
difficult to decide on which options they may qualify for to save their
homes. They may waste time looking for that perfect solution that does
not exist, or they may pick the wrong option to work on and lose their
homes. Understanding how the foreclosure process will be conducted by
the bank and the court will help them avoid either of these
consequences.

In general, homeowners should begin worrying about
the possibility of foreclosure as soon as they experience a financial
crisis, whether it be a loss of job or serious illness or disability, or
otherwise. Although homeowners who have read this blog before have been
counseled numerous times that they absolutely need an emergency fund,
they should not rely upon their savings lasting longer than a few
months, at the most. At this point, when they are having difficulties
maintaining their income, but have not yet missed a payment, it is also a
good idea to contact the mortgage company and explain the situation to
them, while emphasizing that it is not yet out of control. The lender
may be able to lower the rate for a period of months, or allow the
homeowners to miss a few payments which will be paid back after their
income has recovered.

But it is once the homeowners begin missing
payments without a prior agreement with the mortgage company that
foreclosure becomes a serious concern. The bank understands that most
families who miss a payment will quickly recover and get back on track,
so they will not put a house into foreclosure if only one or two
payments are missed, especially if the owners are keeping in contact to
explain the situation. At a certain point, though, depending on the
individual lender, they will have to begin foreclosure proceedings to
sell the house at a public auction and attempt to pay off the defaulted
loan. Once they decide that this is the only realistic way their loan
will be paid back, they will begin the foreclosure process.

Banks
do not pursue the foreclosure on their own, however; they hire local
attorneys to file the paperwork with the county court and publish
notices in local newspapers. The attorneys will attempt to contact the
homeowners to arrange payment of the loan, either to reinstate the
payments or pay if off in full. As many homeowners can not afford either
option at that point, the lawyers office will sue them on behalf of the
lender. Homeowners will be sent paperwork regarding this suit, and be
requested to appear in court at a default hearing. If they appear, they
may be allowed more time by the court to find a solution to prevent
foreclosure. Unfortunately, most homeowners will avoid this hearing,
thinking that they will be sued right then and sent to a debtors prison
for not paying their mortgage. The lender is given the default judgment
against the homeowners, and the attorneys will begin moving towards a
sheriff sale.

Under most state foreclosure laws, the sheriff sale
needs to be published for a period of time in newspapers or public
forums located in the county. This is one reason that homeowners may
first find out about the foreclosure auction from a neighbor or family
member who notices the property in the paper and alerts the victims. At
this point, the process is quickly proceeding to a point where there
will be no options left to save the home, as the family will no longer
own the property at all. Although the sheriff sale can be stopped,
giving the homeowners more time to stop foreclosure entirely, if there
is a realistic solution to the problem, now is the time to pursue it.
The longer the homeowners wait to save their home, the less chance of
success will exist.

At the sheriff sale, the property will be auctioned
off at a set starting price, which varies from state to state and county
to county. In a small number of cases, a third party will purchase the
home at the auction. Typically, the bank purchase the property back,
though, and uses its own money to pay off the loan and take possession
of the property. The sale can be confirmed within a week to a few weeks
after the sale, and the homeowners will no longer be listed as owners of
the house, and will have no right to remain living in the property,
unless state law allows for a redemption period.

A redemption
period is time given to homeowners after foreclosure that they can stay
in the home and attempt to sell, refinance, or otherwise pay back the
amount due. The lender can not start the eviction proceedings until
after the end of redemption, and the homeowners do not need to have any
plans to keep the house to remain living there. Although the bank owns
the property at this point, the law allows homeowners to regain
possession. Not all states allow homeowners a redemption period, and the
length of time varies widely from state to state, which makes it
necessary for homeowners to research what protections their own state’s foreclosure laws allow them.

After
the sheriff sale is confirmed in states that have no redemption after
the auction, and after the end of redemption in states that allow for
such protections, the eviction process will begin. The homeowners will
be sent paperwork again by the court and the lender’s attorneys
requesting their appearance at a hearing, the purpose of which is to
order the homeowners to leave the property by a set date. If the
homeowners appear at this hearing, they may be given extra time to move
out, or even purchase the property back from the bank. However, if they
do not appear, the lender will be given possession and the county
sheriff will be ordered to conduct the eviction.

The eviction
process itself can take as little as a week to a month before the
sheriff actually shows up to remove the homeowners from the property.
Due to constraints on the time and resources of the department, and the
number of other investigations and foreclosures pending, foreclosure
victims may have a few weeks to find a new place to live, although they
should not be wasting any time at this point. The sheriff will typically
post a notice on the property at least three days before the scheduled
eviction, but three days is very little time to pack up an entire house
and move out. The family may be able to negotiate for a few extra days
or a week, at most, in order to effect a peaceful solution, but there is
no expectation of being able to stop the eviction process completely.
If the foreclosure has progressed this far, the former owners should be
more concentrated on moving on with their lives and starting over,
instead of risking an embarrassing eviction witnessed by neighbors.

The
foreclosure process differs from state to state, so homeowners should
start researching what to expect by reading their foreclosure laws. This
will give them more of the details that the above description glosses
over, and will allow them to fill in many of the blanks, such as how
long each stage will take, and what their and the lender’s
responsibilities are during the process. Though simply knowing how the
foreclosure process works will not guarantee any homeowner will be able
to avoid foreclosure, they will have a much better understanding of
available ways to stop foreclosure and how much time they have left to
save their homes.