The foreclosure process allows lenders to recover the mortgage balance from owners who have fallen behind in payments, by selling the property on the open market. The process begins after a series of missed payments. The process varies by state but, regardless of the location, the homeowners must vacate the home once the home sells or a sheriff physically evicts them.
First Missed Payment
A missed mortgage payment does not automatically start the foreclosure process. Typically a lender will contact the home owner via phone after the first missed payment. Depending on the state of residence, foreclosure proceedings from the lender start after the third or fourth missed payment. Seeking the assistance of a housing counselor is recommended if you have only missed one payment. Counselors can help negotiate with the lender for a loan modification or other mortgage assistance program.
Notice to Accelerate
The third missed payment triggers the lender to send a demand letter or notice to accelerate. This notice gives the owner 30 days to become current on the mortgage before the foreclosure process begins. If the lender does not receive payment within the grace period, it may contact attorneys to proceed with the foreclosure.
According to Stephen Elias, author of "The Foreclosure Survival Guide," a person can remain in the home even after a foreclosure sale. Elias says that the owner becomes a tenant and is entitled to remain until notice is given. The eviction timeline varies based on ownership of the home. It can take up to thirty days before a notice to leave is served. Then you will have between five to thirty days to vacate the home depending on your state of residence.
Many states allow you to remain in the home after the grace period on which a termination notice has run out, pending physical eviction under a court order by a sheriff. The new owner files for the order in court, which can take several months, thus buying more time for the previous owner to remain in the home. However, this strategy is not recommended as it can lead to a public record that can hurt your chances of renting or leasing another home. The new owner can also sue for rental value of the property if you remain in the home after the termination date.
Points to Consider
If you have decided to let your home go into foreclosure, you can use this time to save for the future. A foreclosure is a legal proceeding that can possibly take several months. Depending on the laws of your state, you may be able to live in your home rent free for up to nine months before receiving a termination notice. Each situation is unique and while foreclosure is not a desirable outcome, sometimes it is an inevitable one.
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