Understanding the Mortgage Foreclosure Process

Each state has their own mortgage foreclosure process and laws, but there are many similarities and there are five stages of foreclosure involved in every foreclosure.

Stage 1 of the Mortgage Foreclosure Process

As soon as you stop making your monthly mortgage payment, the mortgage foreclosure process begins. The amount you owe your lender starts to increase because of late fees and penalties. Your lender will start an official letter campaign, explaining what will happen if you don't start paying - your home will be added to the homes in foreclosure.

Stage 2 of the Mortgage Foreclosure Process

Your lender starts foreclosure by filing the appropriate papers with the county where your home is located. The clock will start ticking. During normal times you would have 30-90 days to prevent an auction of your home. Today, however, most lenders are so swamped with foreclosures that it can take much longer. This may give you some extra time to resolve your situation.

Stage 3 of the Mortgage Foreclosure Process

At this point it is critical that you start talking with your lender. If you are financially able and want to stay in your home, let your lender know that you are willing to do what it takes to remain in your home. Ask them about foreclosure alternatives to help you do this. If you can't resume payments and don't qualify for a foreclosure alternative to help you stay in your home, ask them if they will accept a Short Sale or a deed-in-lieu of foreclosure. Today many lenders are agreeable to an alternative if you qualify rather than pursuing a foreclosure, which is extremely costly for them.

Stage 4 of the Mortgage Foreclosure Process

You will be given one last chance to avoid the foreclosure auction. If you cannot reach an agreement with your lender, you will be asked to vacate the property. If you don't comply, the Sheriff will evict you before the auction.

Stage 5 of the Mortgage Foreclosure Process

Now it's just prior to the auction. Legal notices are posted in the paper regarding the auction. At the auction, the home will be sold to the highest bidder. If your home is not sold at auction, the bank becomes the owner through the foreclosure. What was your home is now part of the lender's real estate owned (REO) inventory.

If you want more information on whether you really should try to save your home you can find out here.