If you have fallen behind on your mortgage payments due to circumstances that you could not possibly have predicted, such as mounting medical expenses, having lost your job, or being hit with steep increases in your homeowner’s association dues, or a rise in homeowner’s insurance costs, you may have been informed that the bank that holds your loan has initiated foreclosure proceedings on the property. When this happens, the team of foreclosure attorneys at Macco Law can help. They have worked with many clients who seem confused and uncertain as to their legal rights or what, if any, consequences foreclosure may bring to their lives. Read on to find out more about foreclosure and what you can expect after you file.

Work With Your Bank

Many homeowners are likely unaware that the bank that holds their loans may be willing to work with them when their financial circumstances have changed and they have fallen behind on their monthly payments. Before deciding to file for foreclosure, talk to them to find out if they are willing to give you the option of making modified payments while your financial picture improves. You lose nothing by talking to your lender and may avoid having to take drastic actions that can have a long-term impact on your life and that of your loved ones.

Understanding Foreclosure

Foreclosure refers to the act of a bank or mortgage lender taking possession of a property that is in default. Most times this happens against the will of the people living in it. However, most mortgage agreements have words to the effect that the bank can reclaim the property through foreclosure whenever you stop making payments on your loan.

Typically, there are two different types of foreclosure and the state where you live may give you the option of both or just one of them. These could be either a judicial foreclosure in which it is the lender who first files to initiate these proceedings by going to court and fighting the lawsuit. Losing means the house can be sold at auction.

The second option is called non-judicial foreclosure and it implies a faster process than that required during a judicial foreclosure. In these cases, the mortgage clause authorizes a trustee who is appointed by the lender to sell the home with the aim of paying off the balance. The lender has to follow certain steps laid out by the state and the mortgage agreement as the foreclosure process begins.

When Does Foreclosure Officially Start?

A foreclosure will start whenever the homeowner breaks their repayment agreement with the bank or lender and fails to make alternative arrangements such as requesting a loan modification.

In both foreclosure options, the initial step usually starts as soon as you miss your first mortgage payment. Here is a common picture of the steps that will happen after that.

First Missed Payment

At this point, you may find that the lender is willing to give you a grace period of a couple of weeks after the due date for you to make the payment. Otherwise, you could be charged a late fee and the credit bureaus might be informed of the fact that you are late with your payment.

Defaulting on the Mortgage

Whenever a homeowner continues to miss their mortgage payments, they will be considered to be in default. Reaching this point depends on your specific lender and how long of a grace period they are willing to give you.

Once you are deemed to be in default, you can either face a judicial or a non-judicial foreclosure. The judicial foreclosure usually comes into effect when there is no “power of sale” in your agreement or whenever your state mandates this type of foreclosure.

A non-judicial foreclosure would happen when there is a power of sale clause in the agreement and when this procedure is allowed under state law. This option is usually quicker and much less expensive.

Notice of Default and Foreclosure Lawsuit

In cases of judicial foreclosures, the lender will file a lawsuit. You must respond or the judge will grant the lender a default judgment. Responding may mean going to trial.

In a non-judicial foreclosure, your lender will issue you a notice of default which you will receive via certified mail and which is also recorded with the county registrar. The notice will state how much you owe, any late fees, and any other costs. You have 90 days to repay what you owe or come up with a repayment plan with your lender.

Pre-Foreclosure

If you are able to pay what you owe between the time you receive the notice and the home is sold, the process will stop. Make every effort to work with your lender so that you can avoid foreclosure and remain in the home. This can happen when the lender offers you a special payment or relief plan to which you may be eligible.

Notice of Sale

Not paying what you owe or not making arrangements with your lender within the period established in the notice of default, means the lender will issue a notice of sale. This may be posted on the property or published in the local newspaper. At this point, the lender will prepare the property to be sold, meaning that they will set a date and time for the sale to take place.

Moving Out

Reaching this point means that you will have no other option but to move out of the home. The laws of the state where you live determine how much time you have to vacate the premises.

Usually, you will not have to move out of the home until the foreclosure process is complete. This means you may have between a couple of months and up to a year or longer. Once the property is sold, you can not remain in it further although even once the home is sold the lender may give you some time to move out which could run from a couple of days to a couple of weeks.