Commonly, a homeowner will take out a home loan from their bank, while using the home as collateral for repayment of that loan. This creates a mortgage for the property, and if the homeowner cannot repay the loan, the lending institution can take the property, or foreclose on it, and use the ownership or sale of the home to fulfill the debt.
Though states vary on how the foreclosure process is handled, there are six general phases that occur in the process.
- Phase 1, Payment Default: The borrower has missed one or more mortgage payments. After two payments are missed, the lender may send the borrower a demand letter.
- Phase 2, Notice of Default (NOD): A Notice of Default is sent 90 days after the missed payments. Usually, the loan will be transferred to the lender’s foreclosure department. The lender then lets the borrower know that the NOD is on record. The next 90 days are known as the reinstatement period, allowing the borrower to settle the payments and reinstate the loan.
- Phase 3, Notice of Trustee’s Sale: If the borrower was unable to pay back the missed payments within the 90 days, a Notice of Trustee’s Sale will be recorded in the same county where the home is located. A notice will also be published in the local newspaper for three weeks, including information about the sale as well as the owners’ names.
- Phase 4, Trustee’s Sale: The property goes on sale at a public auction, where it will be purchased by the highest bidder. A Trustee’s Deed Upon Sale will be given to the winning bidder, who is then entitled to immediate possession.
- Phase 5, Real Estate Owned (REO): If not sold at auction, the lender will become the owner, also known as bank-owned property, and will sell the property on its own. At this point, the lender can remove any liens or other costs to lure more prospective buyers.
- Phase 6, Eviction: Up until the sale, the borrower is usually allowed to remain in the home. Once sold, an eviction notice is sent and all persons in the home must vacate the property immediately. Generally, several days are given to the occupants to pack up and leave the home; the sheriff will then usually come, and ensure the property is vacant.
Often times, a lender will do what they can to allow the borrower to catch up on the loan. Catching up on payments becomes increasingly difficult, so if something happens such as landing a new job after a time of unemployment, it is worth speaking to your lender and attempting to work something out to avoid foreclosure.
An acceleration clause, also known as an acceleration covenant, will require the borrower to immediately pay off the loan in its entirety, provided that certain conditions are met. For instance, if you miss “x” amount of payments, the acceleration clause may be triggered. The best way to avoid triggering the acceleration clause, is to avoid missing payments.
Sadly, there is little an attorney can do to help stop a foreclosure process. Typically, the bank/lender has every right to foreclose on the property, especially once the property has gone into default and the owner is behind on payments. In rare cases a real estate lawyer can help, but only in cases of a fraudulent foreclosure or some other interference. If you have been paying your entire mortgage balance and are not behind on payments, but are still being foreclosed, then it is in your best interest to contact your lender to find out what happened.
If it becomes clear that you are a victim of foreclosure fraud or some mortgage scam, then have your evidence ready when you contact a local real estate lawyer. But your first step should be to find out the amount that you owe and why your home is being foreclosed, so if you need to contact a lawyer they can best help you.