How it works..
The foreclosure process is different in every state. If you are behind in your mortgage, then you should learn about your state's foreclosure laws. Differences among states range from the notices that must be posted or mailed, redemption periods, and the scheduling and notices issued regarding the auctioning of the property.
Most mortgage companies start the foreclosure processes soon after the first missed mortgage payment. Late fees are charged after 10-15 days, most mortgage companies recognize that homeowners may be facing short-term hardships, which is why you must stay in contact with your lender within the first month after missing a payment.
Depending on the laws of your state, three types of foreclosures may be initiated at this time: judicial, power of sale and strict foreclosure. All types of foreclosure require public notices to be issued and all parties to be notified regarding the proceedings. No matter what your state’s process is-Once your home is sold through an auction, you have a short amount of time to find a new place to live and move out before the sheriff issues an eviction.
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Judicial Foreclosure. All states allow this type of foreclosure, and some require it. The lender files suit with the judicial system, and the borrower will receive a note in the mail demanding payment. The borrower then has only 30 days to respond with a payment in order to avoid foreclosure. If a payment is not made after a certain time period, the mortgage property is then sold through an auction to the highest bidder, carried out by a local court or sheriff's office.
Power of Sale. This type of foreclosure, also known as statutory foreclosure, is allowed by many states if the mortgage includes a power of sale clause. After a homeowner has defaulted on mortgage payments, the lender sends out notices demanding payments. Once an established waiting period has passed, the mortgage company, rather than local courts or sheriff's office, carries out a public auction. Non-judicial foreclosure auctions are often more expedient, though they may be subject to judicial review to ensure the legality of the proceedings.
Strict Foreclosure. A small number of states allow this type of foreclosure. In strict foreclosure proceedings, the lender files a lawsuit on the homeowner that has defaulted. If the borrower cannot pay the mortgage within a specific timeline ordered by the court, the property goes directly back to the mortgage holder. Generally, strict foreclosures take place only when the debt amount is greater than the value of the property.