What Does the Foreclosure Process Entail?


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The foreclosure process is initiated when someone that has a mortgage or other loan on a house cannot pay the amount due. After so much of this, the lending agency starts the procedure to seize the property and auction it to attempt to obtain the funds that are needed.

This is often lengthy and may be costly to the financial institution, but if the owner is unable to pay, this provides at least some income. When the default on the payments occurs, the bank or other agency generally gives the individual a certain amount of time to make the amount up and ensure there are no past due payments.

Once the defaulted payments have been in place beyond the provided time limit, the house is then put into the foreclosure process. This typically occurs with a public notice of default and then the procedure progresses to the next stage. If the person that borrowed the money initially is able to reinstate the loan through paying off the default amounts within the state law’s grace period, he or she may stop the foreclosure from moving forward further. The property does not go beyond the pre-foreclosure process. The individual may sell the house to another person during this period, and this income may be used to pay off the loaned monies as well as accrue a small amount of funds for the previous owner. If these do not occur, the house is sold at auction in usual circumstances. However, the lending agency may attempt to take ownership and resell it through the housing market.

Foreclosure Starting Processes

Before a foreclosure may be initiated, the lending agency must prove that the person that borrowed the funds through a mortgage or other loan is in default of the terms and conditions of payment. During this starting stage, the lender will attempt to communicate and resolve the defaulted status of the loan. After these attempts have been completely exhausted, a lawyer is usually contacted for a court action against the homeowner. This legal professional then attempts to contact the borrower for a resolution to the default. If the debt cannot be collected in full or arrangements made, a lawsuit starts with the courts in the local city where the house is. This is to start the pre-foreclosure proceedings with a court’s approval in place.

There are other processes that permit the trustee of the property to initiate foreclosure processes without needing to go to court. This is accomplished through a power of sale clause in the deed where there is a deed of trust. These are non-judicial foreclosures, and they may permit the sale of the house easier, faster and without as many difficulties. The appointed trustee usually must issue a notice of default and communicate with the borrowing individual before the sale so he or she is aware of the procedure and the default status of the mortgage. However, if this homeowner does not respond, the steps may be started without any other complications.

The Auction and Leaving Foreclosure Processes

Once all pre-foreclosure processes have been completed, and the homeowner is unable to make up the past due amount on the mortgage, it is time for an auction in standard foreclosures. This means that there are many individuals notified that a house is being auctioned off to the highest bidder. He or she usually is required to have cash to purchase the property, but there may be a certain amount of hours to procure the funds for immediate buyout. Very few details are usually provided to the public about the house, and the event typically progresses rather quickly. There is a set minimum bid based on what is owed to the lending agency along with any other fees or expenses incurred by the company.

Avoiding an auction or other complications with the foreclosure may be accomplished through a number of ways. However, the primary manner is making up for the defaulted payments on the mortgage or other loans attached to the house. It may be possible to modify the terms of the loan if the financial institution is amenable to this deal. It is possible to complete a short sale, but this would generally lead to less of what is owed, and the homeowner may not make a profit. For a full sale of the house, this must be completed before an auction takes place. Many find that hiring a real estate lawyer may assist with communications with the lending agency. Then, it may be possible to leave the foreclosure process.


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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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