Foreclosure is a situation in which a homeowner is unable to make full principal and interest payments on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated in the mortgage agreement. One month after the homeowner misses a mortgage loan payment, he/she is in default and will be notified by the lender. Three to six weeks after the homeowner does not show for a mortgage payment, assuming the mortgage is still delinquent, and the home owner has not made up the missed payments within a specific grace period, the financial institution will get started to foreclose. The farther behind the borrower falls, the more difficult it becomes to get up since lenders add fees for payments that are 10-15 days overdue.
Each state has its own foreclosure laws within the notices the lender must post publicly and/or with the homeowner, the homeowner's choices for bringing the loan current and avoiding foreclosures, and the method for promoting the property. In twenty two states – including Fl, Illinois, and New York – judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by showing the borrower is overdue.
If the foreclosure is approved, the local sheriff sales the house to the greatest bidder to try and recoup what the bank is due, or the bank becomes the owner and markets the property through the traditional route to recoup the loss. The entire contencioso foreclosure process, from the borrower's first, missed payment through the lender's sale for the home, usually requires 480 to 700 days, in line with the Mortgage Bankers Relationship of America.
The other 28 states – including Arizona, California, Georgia and Texas – generally use non-judicial foreclosure, also known as the power of sale, which tends to be faster and will not go through the courts unless the house owner sues the lender.
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