This is the basic process of how foreclosures work, understanding these basic ideas could help you save your home and / or your credit from being destroyed. The process is slightly different from state to state, but they all work very similar. These steps are just guidelines to help you understand how foreclosures work.
Foreclosure occurs when someone borrows money to buy a home, but can’t pay the monthly payments. The first step in this process usually happens when the bank or lending institution notifies the owners in writing that they are in default of payment.
In most cases, the lender starts the foreclosure process after three consecutive payments are missed. At this time, the lender sends out a letter informing the owners that if they don’t pay what is owed, the lender will be forced to start the foreclosure proceedings. The lender can also request a trustee’s sale or a judicial foreclosure, where the property is sold at a public auction.
(Judicial foreclosure is a lawsuit that the lender brings against the borrower to get the property back.)
Now the homeowners at this point can still avoid foreclosure by making the loan payments current and paying all overdue amounts after the notice of the default has been recorded. This is called the right of reinstatement.
The last date of the total money owed to be brought up to date and paid is called the cure date.
If the homeowners can’t make the overdue payments, the foreclosed property is often sold at a auction or trustee sale, where it is sold to the highest bidder. If the property is worth less than what is owed to the lender, the lender could seek a deficiency judgment.
If they seek a deficiency judgment, not only does the homeowner lose their home, but now owes the difference between what the property sold for at auction and the balance of the loan.
NOTE: Some people think that if they file for bankruptcy, that their mortgage goes away. The fact is that bankruptcy only delays your foreclosure process, it does not eliminate it.
As of 2007, In the state of Ohio, they use judicial foreclosures and from start of the process to the date of auction, it takes roughly 217 days to complete.
