As explained by the U.S. Department of Housing and Urban Development, foreclosure proceedings typically begin within a few months of a missed mortgage payment. From there, the lending institution can use one of three foreclosure process to take over ownership of the home.
This guide explains those three processes. Understanding the differences between them ensures you can navigate the process with as little stress and anxiety as possible.
In this case, your lender would file suit through the applicable court system where you live. Upon receiving notice of non-payment, the court then provides notice to the homeowner that they have 30 days to remit payment in full. If payment is not received, a property auction occurs. Auctions are usually conducted by the local sheriff’s office at the behest of the court.
Power of sale
Some mortgages contain a clause called power of sale. It stipulates that the lender has the power to carry out an auction without getting the local court involved. The lender is also responsible for sending notices to the homeowner demanding payment. This process often occurs quickly, but the court may choose to review the foreclosure to check for violations of the law.
Strict foreclosure is similar to judicial foreclosure. Once mortgage payments stop, the lender files suit with the local court. The court then develops a timeline for repayment. If the homeowner is unable to pay, possession of the property reverts to the lender, who can choose to sell it to recoup their losses. This process is often used when the amount of mortgage debt exceeds the value of the property.
You should always remain in close contact with your lender if you are not able to make mortgage payments. Avoiding calls and notices only delays the inevitable and prevents you from taking the proper steps.