The Basic Foreclosure Process

Foreclosure is what we are trying to avoid, so it is important to understand the process.

There is a common misconception that once a homeowner misses a payment, he is immediately in danger of foreclosure. The reality is that a foreclosure is a legal process that a lender must go through in order to take possession of a property for which it holds a mortgage.  The process for each state is different, however, the milestones that must be passed are typically the same.

  1. Default:  The homeowner must have missed at least one payment (depending on the state) if the property is to enter the foreclosure process. This can also be a missed payment to local taxing authority, a condo association, or a homeowners association.  The homeowner is typically not considered in default until the payment is more than 90 days past-due.
  2. Legal Notice:  The lender or for closing party must notify the owner that they are entering into the foreclosure process. This can be done through either personal service of a document, or if the owner cannot be located, through publication in a legal journal. In Florida, this is called a notice of the lis pendens is (or notice of a lawsuit).  In California, it is called Notice of Default or NOD.  In different states, it can also be referred to as a Complaint, Notice of Sale, or a Petition.
  3. Bank Sale or Auction Date:  The homeowner is informed that he has a bank sale or auction date, at which point the forclosing mortgage company will gain control of the property.  This is also the point at which the homeowner is required to vacate the property.  In Georgia, this is always the first Tuesday of each month.
  4. Redemption Period:  Not all states have a redemption period.  Georgia, for example, does not.  In the case of states where there is a redemption period, this is a period of time in which the homeowner may present payment to the bank and regained possession of his property.

Something to consider: in this current market, given the high volume of properties in distress, it is rare that a lender is able to meet these time frames. Each case is different, however most homeowners have between five months and two years between the last payment they were able to make and an eviction due to foreclosure.  Many lenders will stall a foreclosure as long as there is a viable offer on the property. In some states, a simple letter to the court stating that the house is for sale is enough to stall the foreclosure for up to 90 days.