Q. What is a foreclosure?
A. You have borrowed money from a bank or mortgage company in order to purchase or refinance a home. In exchange for lending you the money, you made a promise that if you could not pay them back they could take the house. Foreclosure is the process that the bank must follow to satisfy the debt by claiming the asset (your home).
Q. Can the bank just come and kick me out of my house?
A. No. The bank must follow the rules of foreclosure. You do not have to leave until someone else owns the property and serves you legal notice to vacate.
Q. How does the foreclosure process works?
A.Step 1 - Notice of Default is filed.
The bank has the option to file this notice as soon as you miss a payment. However, they generally choose to allow a grace period of 60-120 days as a courtesy to the borrower. This is the time when they try to make contact with you through letters and phone calls. They are simply trying to find out why you haven’t paid them and get those payments coming again. They are only interested in getting their money at this point, not taking your home. The more you communicate and cooperate with them, the more they will work with you and possibly wait to file the notice of default.The lender will employ the services of an attorney to act on their behalf as their trustee. The attorney/trustee will file the Notice of Default with the county Recorders Office and a copy will be mailed to you. You will then begin receiving mail and phone calls from people offering to help.Step 2 - Opportunity to reinstate the loan
This sounds pretty hopeful, doesn't it? You can reinstate your loan! You have the power to stop the foreclosure process anywhere along the way until five days prior to the auction of your home. But we're getting ahead of ourselves. How do you reinstate the loan? Bring your loan payments current plus the late fees and whatever penalties are assessed, and you have just reinstated your loan. You've stopped the foreclosure. You won't lose your house. Step 3 - Date of foreclosure is set by the bank
But what if you can't beg or borrow the back payments and other fees? Is all hope lost? Not quite. We've come to the third step of the foreclosure process: the bank sets a date of foreclosure. Typically, the date is three months (about 90 days) after the bank sets the notice of default. You are allowed to live in the house until the actual date of foreclosure. You cannot be evicted or thrown out of the house until this date. You still have time to come up with that money. Step 4 - Notice of trustee sale is prepared, published and posted
If you do nothing to stop the foreclosure process over the course of the next 2 months or so, then the trustee will publish a Notice of Trustees Sale announcing his intention to sell your home to satisfy the debt. This notice will be published in the legal section of the classifieds in a local paper (you've seen those notices in your local newspaper). The bank then mails you a copy of the notice and physically posts it on the outside of the house. If you are not home, it will be posted in a prominent place on the property for all your neighbors to see. The sale is announced 3 weeks prior to the sale date which is a minimum of 90 days from the date of the Notice of Default. You still have time to bring the payments current. Step 5 - The house is sold at a foreclosure auction
We've come to the final step: the foreclosure auction sale. The sale happens at least 90 days after the Notice of Default. There are many things you can do in those 90 days to stop or at least stall the process while you find a long term solution. The Auction is held outside of the courthouse by the attorney acting as trustee for the lender. An opening bid is announced and any interested parties may then start bidding if they have the required deposit. If you are still living in the house and it is sold to a bidder at the auction, the winning bidder can have you evicted by the sheriff within 24 hours. If the house doesn't sell, the bank will show the house just like you would if you were selling the house yourself. The bank may also have you evicted within 24 hours, or the bank may decide to let you stay until the house sells. Bottom line: if you miss a payment, don't let it turn into two. Find the money, even if you have to borrow from family or friends. Although the process can be stopped anytime up to five days before the sale, the earlier you intervene, the easier it is to stop.
Q. How long does this process usually take?
A.In extreme cases it can all happen in a little over 90 days. More commonly it takes 5-8 months. The important thing is to realize that time is not on your side. It is important that you educate yourself and take action.
