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Foreclosure Process

Foreclosure process varies from state to state. It is the process used by mortgage holders to retrieve property on which they have a lien. The foreclosure process is an emotional roller coaster for the homeowner and timely and costly for the mortgage holder.

Before the foreclosure process begins, delinquent accounts are in pre foreclosure. Once a mortgage payment is 30 days late, the lender sends out a notice of a past due payment. When the second payment is missed, the account becomes 60 days past due another letter is sent to the homeowner. During the pre foreclosure process after the second past due letter is sent and the homeowner does not respond, the mortgage holder can demand payment in full.

The final step of the pre foreclosure process is a letter demanding payment in full. The letter may include payment options such as paying the entire balance due on the mortgage or paying the past due payments along with accrued late charges, interest, and other fees due to the lender. Action is required within 30 days to stop the bank foreclosure process from proceeding. This letter is also called a breach of contract letter during the pre foreclosure process.

When these attempts to contact the homeowner prove unsuccessful to the mortgage holder, they begin the foreclosure process. When the account is 90 days past due, the mortgage holder will contact the courthouse and record a Notice of Default (NOD). During this step of the foreclosure process, the notice of default is published in local newspapers as a pending public auction to sell the home.

When the homeowner does not pay the required amount or make other arrangements with the bank loss mitigator, the foreclosure auction will take place. The foreclosure auction can take place at the courthouse or at the property being auctioned. If there are no bids on the home, the property reverts to the ownership of the bank. When the bank regains ownership through the foreclosure process the home is now a bank owned or REO property.

The foreclosure process is lengthy and very demanding on both the homeowner and mortgage holder. It is in the best interest of both parties to work out an agreement before the foreclosure process begins. A forbearance agreement followed by a repayment plan is an option for homeowners in temporary financial situations. However, a loan modification is a better choice for a homeowner with permanent financial changes.