If you think you are headed for foreclosure, it is important to understand all the stages of foreclosure and the options available to you at each stage.
If you think you are headed for foreclosure, it is important to understand all the stages of foreclosure and the options available to you at each stage. When you undertand the foreclosure process, you can find help to save your home.
Late mortgage payments
The first stage in the foreclosure process is when you are behind on your loan payments. In many states the foreclosure process begins when you are 90 days behind. Yet in other states, a lender may initiate foreclosure as soon as you miss a payment. You have the most options available to keep the house in this beginning stage. You can work with the lender to come up with the best option, which may be to catch up on your payments, modify your mortgage, put your home up for sale or any number of other actions that will help you avoid foreclosure. You should also talk to the U.S. Department of Housing and Urban Development (HUD).
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Notice of Default
The second phase in foreclosure is called pre-foreclosure. You will get a notice called a lis pendens or Notice of Default (NOD). Your lender also files this notice with the county courthouse and publishes it in the local newspaper. In some states, the law requires you to post this on your front door. The pre-foreclosure stage is considered a grace period during which you can still take measures to avoid a full foreclosure.
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You may qualify for one of the Making Home Affordable Programs (MHA) to refinance your mortgage, lower your overall principal, lower your home loan interest rate or exit your mortgage gracefully. If you owe significantly more on your home that it is worth because the market value has dropped, you have a few options through MHA. You may get your principal reduced, sell your home in a short sale or get a Deed-in-Lieu (DIL) of foreclosure. In a short sale, your lender allows you to sell your home for less than you owe. It takes a loss on the mortgage payoff. In a DIL, you give your home back to the lender. Both options are better on your credit than a foreclosure.
Notice of Sale
A Notice of Sale (NOS) typically indicates you are in the last phase of the foreclosure process. An auction date to sell your home will be set, filed with the county court and published in the local newspaper. It is usually posted on your front door as well. The auction is typically held in the trustee's office or on the steps of the local courthouse. You have until the moment the home is sold at the auction to pay your delinquent payments and save your home. Additionally, many states have a right of redemption period in which you can save your home even after it sold at auction.
If you don't, your house will be sold to the highest bidder. If there were no bidders or no one bid the reserve price, then the home becomes a real estate-owned (REO) property. An REO is resold by the mortgage lender or HUD in the case of homes that government-insured mortgages.
If you have more questions about the foreclosure process, visit Reply! to find a local real estate agent who can help you decide if a pre-foreclosure sale is your best option.