Foreclosure Process

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A foreclosure occurs when a property owner cannot make principal and/or interest payments on his/her loan, typically leading to the property being seized and sold. If you suddenly find that you can't afford to pay your monthly loan payment, your lender has the legal right to repossess your home and resell it to recoup the cost of the loan. Foreclosure is a legal course of action in which nobody really comes out on top.

There are several stages during which the homeowner has an opportunity to bring the loan current and avoid foreclosure. Foreclosure proceedings can begin after a single missed payment, but it isn't very likely. Most banks and lenders have a grace period for late payments, usually with a fee added on. It typically takes being a full 30 days late for the alarm bells to go off. After the second missed payment, you'll be getting some phone calls. Many lenders will only accept both late payments to bring the loan current. They also may refuse any partial payments. Once you fall three months behind, things get serious. This is typically when most lenders will begin the foreclosure process in one of two ways: judicial sale, which requires that the process go through the court system, or power of sale, which can be carried out entirely ­by the mortgage holder.

All states allow judicial sale, while only 29 allow power of sale. If your state allows power of sale, the loan papers will usually have a clause that says this method will be used. Power of sale is typically faster than the ...