The last thing a homeowner wants is to be trapped in a foreclosure, but what usually occurs is that it catches them off guard, despite the warnings. No one plans in advance to lose his house; they always think they can buy more time to do something about it. But understanding how the foreclosure process works will help the borrower avoid it.
First of all, the borrower misses a monthly payment. Usually a notice or letter reminding of the due date will be sentout. In many cases, the homeowner can get the payment made, albeit a little late. If he still is not able to he should let his lender know as soon as he can.
If a second payment is missed, the bank will usually make direct contact. After all, they do not know if the borrower is sick or even dead and cannot respond to the notices. The worse thing to do is avoid these calls. Your lender wants to try to work out an arrangement.
If the homeowner fails to make the third month’s payment, the loan is now considered in default. Now, the borrower will receive a certified notice giving the borrower dates by which settlement must be made. The official title of this letter is a Demand Letter or a Letter to Accelerate; if the borrower ignores it, the foreclosure proceedings will begin.
Most borrowers have given up on their home once they have reached this point, but the bank is still willing to make an accommodation.
Once the homeowner has missed the fourth payment, the terms outlined in the letter to accelerate have expired and the lender has pretty much given up on the borrower. Lawyers are needed to draw up the official paperwork, and the fees of the lawyers will be tacked onto the borrower’s bills. The home will be placed on official sale.
The official date of the home foreclosure is this sale date. The lender posts the sale on the house, in a newspaper and by letter to the borrower. The homeowner can still reclaim his home, but at a very expensive level.
What do all of these steps tell us about the steps of foreclosure ? That until the very last instant, there is the time and the possibility to negotiate a solution with your bank. The most critical aspect of running into difficulties with your bank is keeping the communication lines open to work out an issue you both want to resolve.