Typical Foreclosure Timeline
A basic illustration and timeline of the typical foreclosure process might look something like this:
- After the homeowner misses their first mortgage payment, the phone calls from the lenders begin and the credit bureau is notified of the delinquency.
- After two missed payments, calls from the bank increase. Depending on the state, a Notice of Trustee Sale is recorded and a 60-day delinquency is reported to the credit bureau.
- After 3 missed payments, the account may be transferred to the bank’s loss mitigation department and a Notice of Default is sent to the homeowner from the county courthouse.
- After 4 missed payments, the property may be auctioned and sold to the highest bidder at the county courthouse and the homeowner is evicted from the property.
In today’s environment, the foreclosure process can often take much longer to complete, but the results are the same. While many states share similarities, the foreclosure process can vary state-by-state.
Foreclosure Can End In One Of Four Ways:
- The borrower reinstates the loan by paying off the defaulted amount plus interest, penalties and other related costs during a grace period determined by state law.
- 2. The borrower sells the property to a 3rd party during the pre-foreclosure period. The sale, if approved by the lender(s), allows the borrower, through the proceeds of the sale, to make a short payoff to the lender, avoiding having a foreclosure on his/her credit history. This is what is known as the short sale process.
- A 3rd party purchases the property at a public auction at the end of the pre-foreclosure period.
- 4. The lender takes ownership of the property at the auction, usually with the intent to resell it as a bank Real Estate Owned (REO) property.
The first two options prevent the completion of foreclosure by the homeowner either paying off whatever is past due on the loan or using a foreclosure alternative to prevent the process from ending with a foreclosure or an eviction. The last two options occur at public auction when it is too late for the homeowner to use any foreclosure alternatives.