Receiving a letter from a bank that states “Your property is going through foreclosure” can be a daunting and scary feeling. Understanding the foreclosure process and your options could help save your credit and even your property.
Unfortunately, we all go through hard times such as layoffs, death of a loved one or business hurdles, etc. After missing several payments to the Lender, the bank’s collection department will try on multiple attempts to collect missed payments and/or fees accumulated. Over the course of 6-8 months (depending on your state), the Lender will try to bring the mortgage current by collecting monies owed or structuring payment plans. If you are unable to reach an agreement with the Lender on a payment plan, the account is transferred to the Loss Mitigation department to foresee the property through foreclosure.
The Loss Mitigation department will hire an attorney or representative to obtain a deficiency judgment of foreclosure and prepare the property to be sold at the foreclosure auction. The property is publicly announced through a newspaper or online format of the sale. If no one purchases the property at the auction, the Lender transfers the property to its’ REO department.
It is important to note some state’s give the property owner an opportunity to reclaim their property even after the property was purchased at the foreclosure auction because of a redemption period. A redemption period is a time between the purchase of the property at the public auction and a set expiration date which can be up to 30-90 days. The property owner can reclaim the property within this time period but would need to have the necessary funds to do so. Check with your local state laws to find out what applies to your state. If the state does not have a redemption period, once the property is sold at the foreclosure auction, the property owner loses the property to the highest bidder.
In the case of a Lender taking back a property from the auction in a state with a redemption period, the REO department will wait for the redemption period to expire before selling the property to recover any professional fees and losses. If there is no redemption period, the REO department will hire a professional agent internally or externally to sell the property on the open market as soon as possible.
It can be a stressful process for an owner going through a foreclosure. There are a few options an owner may have to keep their home and possibly avoid a foreclosure I review in more detail in my next article, Foreclosure Options for Owners.
Foreclosure should be handled with the utmost care. Anyone going through a foreclosure should always contact their Lender for more information on company processes. Additionally, speaking with an experienced Real Estate professional or Foreclosure Attorney may be in the best interest of the owner to understand their state laws/processes and options.