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The Foreclosure Process

If you are having trouble paying your mortgage, you may be wondering about the possibility of foreclosure and whether you have any hope of saving your home once that process starts. The specifics vary by state, but the general outline is similar no matter where you live.

Mortgage Default

One missed payment will not put you in foreclosure, but it does bring you one step closer if you don't bring your mortgage current. If you are having trouble doing that, talk with your lender right away about restructuring or modifying your loan.

Your lender will begin charging late fees sometime during that first month, and after 30 days your mortgage is officially in default. At this point your lender can begin foreclosure proceedings, although most will try to work out a resolution first.

Foreclosure Notice and Auction

If you did not make acceptable arrangements with your lender, you will receive a foreclosure notice, often about three to six months after you missed your first mortgage payment. This notice is basically your final chance to resolve your default. The notice will typically give you 30 days to do so.

The type of foreclosure your lender may use depends on what your state allows and the terms of your mortgage agreement:

  • Judicial foreclosure: This is the most common type. It is overseen by the court, which authorizes your local sheriff's office or a private company to hold a public auction once your payment deadline passes. It will use the proceeds to pay off your mortgage and any other liens on the property, and you receive any money left over. Some states require this foreclosure process.
  • Strict foreclosure: The court also oversees the process, but instead of holding an auction gives title to your property to your lender. The lender is not obligated to sell the property, and if it does, you are not entitled to any of the proceeds. Only a few states allow this type of foreclosure and usually only when you owe more than the property is worth.
  • Power of Sale: This type of foreclosure does not involve the courts. Your mortgage lender holds the auction and pays itself and any other lien holders from the proceeds. You receive whatever may be left.

In many cases you are allowed to bid at the auction and, if you win, apply your current mortgage toward the price. You will still need to pay your debt to your lender along with additional costs related to the auction. If another person buys the property, and you are still living in the home, you will receive notice to move.

If you are facing foreclosure, it is a good idea to talk with a foreclosure lawyer to be sure you understand the options that apply to your unique case in your state.