Foreclosure Facts - How Foreclosure starts and ends and other facts you should know about foreclosures.

How Foreclosure Starts.

Any time a mortgage remains unpaid after the due date for a payment, the lender has the right to start foreclosure. (An exception is that your loan agreement or a local law may require that the lender wait until a specific grace or “forbearance” period passes.)

A foreclosure starts when the Lender (or his representative) files a legal notice with the County where your house or property is. Normally, the Lender must send you a certified letter stating that your loan is in default and telling you how much is owed in back payments and fees.

How Foreclosure Ends.

A foreclosure will end either when the loan is brought current (“reinstated”) or the house is sold at auction (Sheriff or Trustee’s sale).

Reinstatement.

Some states and some loans require the lender to “reinstate” your loan if you bring the loan current within a certain period after the start of the foreclosure. That cancels the foreclosure and your loan continues as if there had been no interruption. Most lenders will reinstate a loan up until the last day before the Sheriff or Trustee’s Sale, if they receive certified funds for the full amount of payments and fees due. 

Sheriff or Trustee’s Sale.

After the required time has passed from the filing of the foreclosure, and if the loan is still in default, a sale will be held by either the Sheriff or the Trustee. This will be an auction, normally held on the “Courthouse steps”. The minimum bid required is usually the total amount due to repay the loan, plus all payments and fees due. If the house sells for more than the amount owed, any additional proceeds must be used to pay other mortgages and liens. Anything left over will go to the foreclosed homeowner.

Eviction.

About five (5) days after the Sheriff or Trustee’s sale, an eviction often takes place. In certain circumstances, you may be able to stay longer, especially if you have genuine legal issues in question.

Balance Still Owed.

In some cases, if the foreclosure sale does not collect enough money to pay all liens and expenses, the former homeowner may still owe money on those unpaid debts.
This will vary from state to state. In some states, the law says the debt is forgiven if the loan was used for the sole purpose of purchasing the debtor’s primary residence. However, any home equity loans or refinanced mortgages would not be forgiven in this situation.

Right of Redemption.

In some states, a person who loses a property to foreclosure may have up to two (2) years to buy the property back after an eviction. Find out if this is the case in your state.

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