Understanding the Foreclosure Process
What happens during the foreclosure process varies from state to state. So, in order to understand exactly how much time you have, you need to locate your state’s foreclosure laws and research the timelines that pertain to your particular state.
While the process varies from one state to another, generally the home foreclosure process takes anywhere from 3 to 9 months, and in many cases, much longer than that. For example, we have seen these timelines over the last several years can be drawn out much longer with some homeowners staying in their homes up to 1-2 years during the process.
The entire process can take a very long time from initial default to the actual public auction of the property. If a member of the military is an owner of the property, there are additional safeguards required by federal and in some cases state laws.
From the beginning of the process, however, the meter is running. The longer the foreclosure takes, the greater the debt that accrues and the larger the liability the homeowner has, something that will become critical down the road. Each month late fees along with foreclosure fees are going to add up until the home is auctioned off.
Why are their different foreclosure laws and timelines in different states?
Some states use the judicial foreclosure process and some the non-judicial.
Non-judicial foreclosures are based on deeds of trust that contain a power-of-sale clause. The clause enables the trustee to initiate a foreclosure without having to file a lawsuit or go to court. The trustee is typically required to issue a notice of default and notify the borrower. For example, in California, court foreclosures only occur if a lender desires a deficiency judgment. However, in almost all cases, foreclosures in California are handled out of court.
In states that have trust deeds and pursue judicial foreclosure such as Florida, a court proceeding will be required first, at which point a judge will allow the lender to take possession of the property. When it is all said and done, a trustee will sell your property at a trust sale, this process will take approximately 9-12 months or more.
Again, this varies from state to state.
It is important that you know that anytime during this process, you can request what is called a loan workout and ask for a loan modification, short sale or deed in lieu of foreclosure. Please also keep in mind that often homeowners do not receive assistance from their mortgage servicers until they are at least 30-60 days late or more on their mortgage.
Here is a simple timeline of the basic process from the Pennsylvania Housing Finance Agency and below you will find a more detailed explanation.
1/2/2015 – January payment becomes past due.
2/2/2015 – February payment becomes past due – account is now due for 2 payments.
3/2/2015 – March payment becomes past due – account is now due for 3 payments.
3/5/2015 – Lender sends the Notice of Intent to Foreclose (Act 6 Notice) to the mortgagor. If applicable, the lender will also
send an Act 91 Notice that makes the mortgagor aware of the Homeowners’ Emergency Mortgage Assistance Program.
4/8/2015 – Act 6 and Act 91 Notices have expired – Lender refers account to Foreclosure attorney.
5/8/2015 – Foreclosure attorney begins the legal process by filing a “Complaint” at the county courthouse.
6/23/2015 – Mortgagor does not respond to the complaint – a “Default Judgement” is entered.
6/25/2015 – Sheriff’s office schedules a “Sheriff Sale” date.
7/25/2015 – Notice of “Sheriff Sale” is sent to each mortgagor on the loan.
8/25/2015 – “Sheriff Sale” is held.
8/27/2015 – Sheriff prepares and records a deed conveying title to the purchaser. If a third party does not purchase the property, the deed will convey title back to the lender.
8/27/2015 – Eviction process begins if the mortgagor still resides in the property.
Here is a more detailed explanation:
30 Days Late – Normally when you miss one payment and are 30 days delinquent, a late charge will be assessed to your payment. Your mortgage servicer may attempt to make contact with you in order to get an explanation of why you missed the payment, and to also see when you will be making another payment.
45-60 Days Late – Your servicer will send you what is called a “demand” or “breach” letter stating the original mortgage terms and that you are in risk of default. This notice may also be called a “notice of intent to accelerate” and is sent to make you aware of the past due amount. This notice also is to warn the borrower that if they do not come to an agreement with their mortgage servicer on the past due amount, foreclosure proceedings will move forward. You will also likely receive collection calls in an attempt to collect on the past due amount on the debt.
90 Days or More Late – Generally in most cases after you have missed 90 days or 3 months of payments, you can expect your mortgage servicer to file a court action called a notice of default or NOD which will legally start the foreclosure process. They will send you this notice by certified mail, and may tack a notice on your home.
Your servicer will then refer your account to its loss mitigation department/foreclosure department and will retain a law firm in the state to handle the foreclosure legal proceedings with the courts. Depending on your, the servicer legal representative may record a Notice of Default at the local courthouse which will be published in the local newspaper. By this time serious legal fees are accruing.
As I stated above, please keep in mind that even though the legal process has started, you can remedy or cure these past due payments, collection costs and late fees by paying them in full. If you do this, you can stop the process and bring your mortgage current. Another option is to perform some type of loan workout such as a loan modification or repayment plan in order to make an agreement that will take you out of foreclosure and back on track to saving you home.
During the foreclosure, lenders issue a public notice that will be printed in the local newspapers and or posted on your front door depending on the law of the state where your property is located. This is also done to announce to other creditors and give them a chance to pursue any claims they may have against you for which your home is the collateral.
Unfortunately, these same notices will also identify you to any local Realtors, attorneys, real estate investors or loan modification companies who will try to get your business by claiming to help or save you from foreclosure. You need to be very leery of anyone who cold calls you one the phone or sends you mail. Often, homeowners are sent official looking mail and receive calls from what appear to be foreclosure saviors, but are often clever scams and ponzi schemes.
I advise that all homeowners who think they may be late or are late to call, email, fax and mail their mortgage servicers until they get help. Document everything during this process because yes folks, it is a legal process and you may get sued.
- Avoid foreclosure with a loan modification
- Avoid foreclosure with a short sale
- Avoid foreclosure with a deed in lieu of foreclosure
- How loan does a foreclosure stay on your credit?
- What happens after your home has been foreclosed on?
- How long can I stay in my home after foreclosure?
- Making Home Affordable
- Home Affordable Modification
- Home Affordable Refinancing
- HELP 24 hours a day / 7 days a week – (888) 995-HOPE
- Help For Homeowners Facing The Loss Of Their Home (En Español)
- HUD Approved Housing Counseling Agencies: California Cities
- List of Approved Credit Counseling Agencies
Here are some other resources:
- Fannie Mae
- Federal Deposit Insurance Corporation
- Federal Reserve
- Federal Trade Commission
- Federal Bureau of Investigation
- Freddie Mac
- Homeowners’ HOPE Hotline
- HOPE NOW Alliance
- Making Home Affordable
- Mortgage Bankers Association
- National Consumer Law Center
- National Community Reinvestment Coalition
- National Council of La Raza
- National Fair Housing Alliance
- Neighborhood Assistance Corporation of America
- NeighborWorks America
- U.S. Department of Housing and Urban Development
- U.S. Department of Justice
- Click here to access the Legal Services Corporation’s directory of state and local legal aid organizations, many of which assist homeowners facing foreclosure.