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Foreclosure Timeline - The 6 Phases of a Foreclosure
Once a foreclosure is deemed necessary, several phases happen in a particular order. These foreclosure timeline phases and the timing involved will vary from one state to state, based on the local law for foreclosures. In addition, banks may enforce their loan terms and conditions as they best see fit.
Depending on each homeowner's unique situation and each location presented for the bank, the foreclosure process may be either accelerated or delayed. While there is no universal foreclosure timeline enforced, the process most often involves six phases. This overview gives a summary of the steps and timing that apply in general.
Phase 1 of the Foreclosure Timeline: Missed payment #1
- If a homeowner has not submitted their payment by their usual due date deadline, the lender will call or mail a notice requesting payment immediately. This may be 30-days after the normal amount due date. At this early point, public records may post the property on local pre-foreclosure lists.
Phase 2: Missed payment #2
- If the homeowner did not make up their first missed payment and then missed a second payment, the lender will become more active and make several more attempts to contact the homeowner immediately. The homeowner is now over 60-days past due and behind on two payments, plus any fines, in total. The home remains listed with other available pre-foreclosures.
Phase 3: Missed payment #3
- In certain states, this is known by the legal term lis pendens. 90-days since the first missing receipt of payment, the lender usually sends a formal notice of default to the homeowner. At this point, the lender will provide the total amount due to bring the mortgage back to current status and demand payment be paid in full within the next 30-days. The home is now entering the most critical part of the foreclosure process.
Phase 4: Missed payment #4
- Typically this is the final straw for the lender. Once the time limit provided in the notice of default has passed, and the homeowner has not made payment or arrangements to bring their account current, the lender takes legal action to end the pre-foreclosure stage and repossess the home. Home loans are callable or can be accelerated at this point to force the homeowner to pay the full amount due. The original mortgage terms are canceled. The home involved has now officially joined the list of foreclosed homes.
Phase 5: Real estate foreclosure auction
- The property is now subject to immediate sale through an auction. The lender sets an auction date in conjunction with a local sheriff or public trustee. Foreclosure auctions may also be called sheriff's sales. Anyone can submit a bid on the property on the date of the auction. The auction winner becomes the new owner, pending some final confirmations and the possible redemption period.
Phase 6 of the Foreclosure Timeline: Redemption rights
- In some cases, the original homeowner can still retain the home after the auction. A redemption period may be available to allow this to happen. The redemption period would give the homeowner one last deadline and a chance to pay all the outstanding payments, fines, and fees and redeem the property once again. While a home redemption can take the property rights away from the auction winner, this is unlikely to occur at the end of the foreclosure process.
It is not unusual for the real estate foreclosure auction winner to be the lender or guarantor of the original mortgage. When the mortgage lender is a bank and wins the auction, the home becomes the physical property of the bank. These foreclosed homes are called REO bank foreclosures or REO properties. REO stands for Real Estate Owned, referring to bank-owned property.
The US Department of Housing and Urban Development, or HUD, is often involved in government repossessions. When a government entity guaranteed the original mortgage, the home may become one of the government-repossessed homes. Homes taken back by them are known as HUD foreclosers. This makes these foreclosures especially attractive. Special programs sponsored by the government may be available for buyers of HUD homes.
Either way, when these repossessed homes finish the auction process and redemption period, no new public buyer participates or completes the purchase. Then, an REO foreclosure or HUD foreclosure can be made available for re-sale and join our master database listings of repossessed homes.