Four Phases Of Foreclosure

Foreclosure is not a cheerful thing but every homeowner has to face this reality

. Many people cant understand the concept of foreclosure. If homeowners can understand the meaning of foreclosure they can take action beforehand which can improve their situation and stop foreclosure.

What is foreclosure?

In simple terms, foreclosure happens when borrower stops paying mortgage payments. When borrower is unable to make payments on time due to certain circumstances, lender can either sell the property or repossess his home. Homeowner is not able to make mortgage amount on time because of certain problems like death, disability, divorce etc or because there is increase in loan payment amount which he is not able to pay. These are some of the events due to which mortgage holder sells the home at auction or takes the home back from the owner.

Bottom Line: If home is purchased on mortgage money, then you promise to repay the mortgage loan on time. If you stop paying mortgage for more than 90 days of time, then mortgage lender can take legal steps to take back the home. Those legal wheels are called foreclosure.

Phases of foreclosure process

Stage One: Missed Payments

In most of the states, homeowner will be taken legal action only when he was not able to pay mortgage amount for more than 90 days. If he has missed less than three payments, then homeowner is not in foreclosure. This phase is important because (a) homeowner has to go through it before the foreclosure process can start, and (b) this is the phase in which you as a homeowner have the most options at your disposal. If you missed any payments, just call your lender immediately so that you can put your home on the market for a fast sale.

Stage Two: Pre-Foreclosure

If homeowner is not able to make mortgage payments within 90 days then lender can file a public notice stating that the owner was not able to make mortgage payment on time, and send that notice to homeowner. In some states this is called Notice of Default; in others, it is a Lis Pendens. This stage is called pre-foreclosure because it has a grace period. Homeowner has three calendar months to cure the default. Cure means you can work out an arrangement with the lender, sell the place or come up with the cash you owe.

Stage Three: Auction

If default is not cured within three months, lender can set up a date to be sold at an auction called a Trustee Sale. Before going in for auction, a notice of trustee sale has to be sent to the County Recorders Office, homeowner has to be sent a notice, published in local newspaper. This is done so that people will know that auction is taking place. At the time of auction, home is sold to the highest bidder.

Stage Four: Post-Foreclosure

If third party doesnt purchase property at the foreclosure auction, then lender takes ownership of it. Then, the property becomes bank-owned property, known as REO, short for Real Estate Owned (by lender).

by: Realjeff

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