Overview of the Foreclosure Process

| | TrackBacks (0)

When you buy a home with a mortgage you promise to repay the loan and back up that promise in a contract by offering your property as collateral. Default on the loan and the lender can legally reclaim the property in order to offset losses that result from your non-payment. Most Americans think of foreclosure as an auction on the courthouse steps, but in reality the foreclosure process begins long before that happens. The auction is really the last event in a long line of legal steps that are all part of the foreclosure.

One of the most critical steps - the one that instigates the entire chain of events and sets foreclosure in motion - is the simple act of missing a scheduled mortgage payment.

As soon as a payment is late, the foreclosure clock starts ticking down, and here is an overview of the timeline involved:

  • The Missed Payment

Once a monthly payment is missed the homeowner is in default, and the foreclosure process is imminent. Late fees and penalties accrue, and to "cure" the foreclosure and stop it from happening, the borrower must pay all payments due plus added fees.

During this phase - which can last up to three months or so - investors may approach the distressed owner with an offer to buy the property or take over the payments in exchange for an ownership interest in the home.

  • Legal Gears Shift into Action

A legal representative of the lender is assigned the case, and will attempt to contact the borrower and collect back payments. Lenders may also be willing to let the owner sell the home through a so-called "short sale". Proceeds from the are used to pay off the existing mortgage. Investors often profit from short sales by rescuing desperate homeowners and also getting preferential financing treatment from motivated lenders.

  • Foreclosure Accelerates

Although foreclosure laws vary from state to state, a homeowner who misses a second monthly payment can expect to be foreclosed on within 30-60 days' time.

  • The Auction

Public announcements of the foreclosure auction are placed in local newspapers or on a bulletin board at the courthouse. An auctioneer conducts the auction, selling the property to the highest bidder. The former owner - the foreclosed homeowner- can be evicted if necessary.

That is, in a nutshell, the timeline and process for foreclosure. One other interesting twist is that if the auction does not bring high enough bids, the bank or mortgage company may bid on the property and retain it themselves. In that case they will sell it through their own REO ("real estate owned") department or through a Realtor, to try to get a higher price to offset their losses. REO properties offer discounts to retail pricing, and many investors focus on buying these homes after the foreclosure is officially completed.

About the Author: John Krajewski

I want to help you grow your database, develop quality leads, continue to learn, and move properties! Get instant access to 7 free secrets to foreclosure investing by getting over to: http://www.4closuresecrets.com

Distributed by Ezine Articles.com | All Rights Reserved

0 TrackBacks

Listed below are links to blogs that reference this entry: Overview of the Foreclosure Process.

TrackBack URL for this entry: http://www.boozwatt.com/mt/mt-tb.cgi/175

About this Entry

This page contains a single entry by the boozwatt team published on April 16, 2008 2:41 PM.

The Carnival of Smarter Investing #14 was the previous entry on boozwatt.com.

Free Online Bank Foreclosure Listings is the next entry on boozwatt.com.

Find recent content on the main index or look in the archives to find all content.