How Does Foreclosure Work – 4 Simple Steps To Making Sense Of Foreclosure

May 21st, 2009 | by admin |

If you are asking yourself how does foreclosure work~ ,then this article is going to provide you with answers. At the end of the day if you simplify the process, there are only a handful of steps. You need to understand these steps if you think you are at risk from foreclosure. These steps include the reinstatement of the loan and the default notice being recorded.

Step 1 – Bank Creates A Notice Of Default

The first step of the foreclosure process is when the bank officially records the notice of default. This is basically the first missed payment on your house. This wont occur on the first missed payment – only after a few. This depends on the bank and how they do the foreclosure process. It depends on your bank whether they will begin the foreclosure process after 2, 3 or 4 missed payments.

Step 2 – Loan Is Reinstated

The second step to the foreclosure process is the reinstatement of the loan. The loan can be re-instated in your name. Just because the foreclosure process has started, it does not mean you have definitely lost your house. You wont lose your home until it is sold through auction. If you can come up with the money to pay the missed payments and the late fees then you can reinstate your home loan. This is a possibility in the 5 days leading up to the foreclosure auction.

Step 3 – Foreclosure Date Is Set

The next step in the foreclosure process is for the bank to set the physical date of the foreclosure. This is usually 3 months after the notice of default is set or around 90 days. The home owner is allowed to continue living until this date is reached. No one can physically come and evict you before the pre-set date has arrived.

Next the notice of trustee sale will be prepared. It is also published as public information that the home is up for foreclosure. A copy is mailed to you and posted on the home.

Step 4 – Selling The House At The Foreclosure Auction

The final step to the foreclosure process is that the house is sold at the foreclosure auction. This can go two ways. It is however possible for someone to make a lower bid at the auction than your outstanding loan amount. If this is what has occurred, the new owner can get you removed from the home. This eviction can happen in less than 24 hours by the sheriff. If the home is not sold at auction, the bank will continue to own it. The bank may work toward evicting you right away. However, banks usually hire a company to take care of the home until they can sell it. This could give the home owners a few weeks.

My Conclusion

So to sum it up – how does foreclosure work? Most banks would like to finalize all foreclosures within 90 days. This is what they would tell you. Normally the foreclosure process will last 6 months to a year, depending on whether the home is sold at auction. If you are in the middle of the foreclosure process, you don’t have to move out just yet.