- Once you've missed two to three payments and haven't contacted the lender, they will demand full payment of the mortgage principle plus the past-due payments and legal fees. If full payment isn't made or the mortgage is not brought current through some other agreement, the foreclosure process begins.
- After filing the "Notice of Default" paperwork with the proper offices, you will receive a "Notice of Sale" letter that will also be posted on your property. Notice of your foreclosure is published in the local newspaper as well. Your reinstatement period starts, and you have a certain amount of time before the auction to redeem your mortgage. The length of this period varies by state.
- In most states, you have three months from formal notice being issued to the date of the auction being set. This allows homeowners the chance to redeem their mortgage or move elsewhere.
- If the property isn't purchased at the auction because the sale price is higher than what it's worth, it becomes an REO (Real Estate Owned) property. If you can acquire financing, you can re-purchase your former home through another lender.
- Foreclosure is typically a worst-case scenario. In many cases, you can either refinance with your current lender, find another lender or sell the home yourself to pay off your debt. You can also discuss a "Deed-in-Lieu of Foreclosure" arrangement with your lender, in which you turn over your home to them on more favorable terms.
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