What Steps Bring A Borrower To Foreclosure?

No one would like to be subjected to a foreclosure proceeding, but what occurs in real life is that it creeps up faster than they realize and then it is too late for them to do anything about it. Most people think they will find the time and the money to do something about it. But understanding how the foreclosure process works will help the borrower avoid it.

When the first monthly payment is missed, the slippery slope has begun. Usually a notice or letter advising of the due date will be sentout. Many times, the borrower just had to wait until his next paycheck in order to get the mortgage out. If not, he should make sure to contact his lender to let him know.

A second missed mortgage will usually trigger a phone call from the lender. After all, they do not know whether the borrower is sick or even dead and is unable to respond to the notices. You should not ignore or avoid this phone call. Your lender wants to try to make an arrangement.

The third month in a row that the loan is not paid means it is officially in default. Now, the borrower will receive a certified letter giving the borrower dates by which settlement has to be made. Lenders call this notice a demand letter or a letter to accelerate, and if it receives no reply, the foreclosure process will begin.

This is typically the point when most homeowners have given up, but the bank is always willing to try to come to an agreement.

But the fourth month in a row without a payment will mean that the Letter to Accelerate terms are called and the lender realizes the mortgage will not be paid. This requires lawyers, and of course that adds even more to the money due to the bank. The house will be placed for official sale.

The date of the foreclosure is the date of this sale. This date must be posted in a local newspaper, and notified to the borrower. There remains a chance for the borrower to get his house back, but it will be expensive.

You may have noticed one common component in each of these steps. At each month's delay, the borrower is encouraged to contact his lender. This is the only way to stay out of foreclosure; to stay in close and constant contact with your bank about the payment of your mortgage.

By: Scott Staudt

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