Although past articles I have written have examined numerous topics relating to foreclosures, mortgages, and real estate, one of the few topics I have not yet touched on in a less than tangential way is how the actual foreclosure process works, from beginning to end. This is a very broad topic, of course, and one that is dealt with differently in every state, but a short discussion can allow homeowners to formulate a general idea of what to expect before, during, and after a financial crisis that causes them to miss their mortgage payment. Without having a general idea how how foreclosure works, homeowners will find it very difficult to decide on which options they may qualify for to save their homes. They may waste time looking for that perfect solution that does not exist, or they may pick the wrong option to work on and lose their homes. Understanding how the foreclosure process will be conducted by the bank and the court will help them avoid either of these consequences.

In general, homeowners should begin worrying about the possibility of foreclosure as soon as they experience a financial crisis, whether it be a loss of job or serious illness or disability, or otherwise. Although homeowners who have read this blog before have been counseled numerous times that they absolutely need an emergency fund, they should not rely upon their savings lasting longer than a few months, at the most. At this point, when they are having difficulties maintaining their income, but have not yet missed a payment, it is also a good idea to contact the mortgage company and explain the situation to them, while emphasizing that it is not yet out of control. The lender may be able to lower the rate for a period of months, or allow the homeowners to miss a few payments which will be paid back after their income has recovered.

But it is once the homeowners begin missing payments without a prior agreement with the mortgage company that foreclosure becomes a serious concern. The bank understands that most families who miss a payment will quickly recover and get back on track, so they will not put a house into foreclosure if only one or two payments are missed, especially if the owners are keeping in contact to explain the situation. At a certain point, though, depending on the individual lender, they will have to begin foreclosure proceedings to sell the house at a public auction and attempt to pay off the defaulted loan. Once they decide that this is the only realistic way their loan will be paid back, they will begin the foreclosure process.

Banks do not pursue the foreclosure on their own, however; they hire local attorneys to file the paperwork with the county court and publish notices in local newspapers. The attorneys will attempt to contact the homeowners to arrange payment of the loan, either to reinstate the payments or pay if off in full. As many homeowners can not afford either option at that point, the lawyers office will sue them on behalf of the lender. Homeowners will be sent paperwork regarding this suit, and be requested to appear in court at a default hearing. If they appear, they may be allowed more time by the court to find a solution to prevent foreclosure. Unfortunately, most homeowners will avoid this hearing, thinking that they will be sued right then and sent to a debtors prison for not paying their mortgage. The lender is given the default judgment against the homeowners, and the attorneys will begin moving towards a sheriff sale.

Under most state foreclosure laws, the sheriff sale needs to be published for a period of time in newspapers or public forums located in the county. This is one reason that homeowners may first find out about the foreclosure auction from a neighbor or family member who notices the property in the paper and alerts the victims. At this point, the process is quickly proceeding to a point where there will be no options left to save the home, as the family will no longer own the property at all. Although the sheriff sale can be stopped, giving the homeowners more time to stop foreclosure entirely, if there is a realistic solution to the problem, now is the time to pursue it. The longer the homeowners wait to save their home, the less chance of success will exist.

At the sheriff sale, the property will be auctioned off at a set starting price, which varies from state to state and county to county. In a small number of cases, a third party will purchase the home at the auction. Typically, the bank purchase the property back, though, and uses its own money to pay off the loan and take possession of the property. The sale can be confirmed within a week to a few weeks after the sale, and the homeowners will no longer be listed as owners of the house, and will have no right to remain living in the property, unless state law allows for a redemption period.

A redemption period is time given to homeowners after foreclosure that they can stay in the home and attempt to sell, refinance, or otherwise pay back the amount due. The lender can not start the eviction proceedings until after the end of redemption, and the homeowners do not need to have any plans to keep the house to remain living there. Although the bank owns the property at this point, the law allows homeowners to regain possession. Not all states allow homeowners a redemption period, and the length of time varies widely from state to state, which makes it necessary for homeowners to research what protections their own state's foreclosure laws allow them.

After the sheriff sale is confirmed in states that have no redemption after the auction, and after the end of redemption in states that allow for such protections, the eviction process will begin. The homeowners will be sent paperwork again by the court and the lender's attorneys requesting their appearance at a hearing, the purpose of which is to order the homeowners to leave the property by a set date. If the homeowners appear at this hearing, they may be given extra time to move out, or even purchase the property back from the bank. However, if they do not appear, the lender will be given possession and the county sheriff will be ordered to conduct the eviction.

The eviction process itself can take as little as a week to a month before the sheriff actually shows up to remove the homeowners from the property. Due to constraints on the time and resources of the department, and the number of other investigations and foreclosures pending, foreclosure victims may have a few weeks to find a new place to live, although they should not be wasting any time at this point. The sheriff will typically post a notice on the property at least three days before the scheduled eviction, but three days is very little time to pack up an entire house and move out. The family may be able to negotiate for a few extra days or a week, at most, in order to effect a peaceful solution, but there is no expectation of being able to stop the eviction process completely. If the foreclosure has progressed this far, the former owners should be more concentrated on moving on with their lives and starting over, instead of risking an embarrassing eviction witnessed by neighbors.

The foreclosure process differs from state to state, so homeowners should start researching what to expect by reading their foreclosure laws. This will give them more of the details that the above description glosses over, and will allow them to fill in many of the blanks, such as how long each stage will take, and what their and the lender's responsibilities are during the process. Though simply knowing how the foreclosure process works will not guarantee any homeowner will be able to avoid foreclosure, they will have a much better understanding of available ways to stop foreclosure and how much time they have left to save their homes.

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