What is foreclosure? 



The idea of losing your home is a scary and stressful situation. No one wants to think about losing their home, but unfortunately, foreclosure does happen, so it is important to understand exactly what a foreclosure is and what happens to the house and the homeowner before, during, and after the foreclosure process. Here is some brief information to explain what a foreclosure is and what’s involved in the process of foreclosure.

What is Foreclosure?

In the simplest terms, a foreclosure means that a legal process has begun in which the lender of your house is taking back property that isn’t paid for. A foreclosure happens if a borrower has failed to pay their mortgage payments, so the lender repossesses the property in order to sell the house.  A foreclosure can happen if property taxes, mortgage payments, and/or HOA fees haven’t been paid. The process for foreclosure may take a while and while the paperwork is going through all of the proper channels, you generally do not have to vacate the property until it is final and at that time you will be given the notice to vacate.

During the time the property is going through the process of foreclosure, you will receive what is known as a “notice of sale”. This document provides information about the auction when the property will be sold, including the date, time, and location of the auction. The mortgage lender is required to publish the notice of sale in the county in which the property is located, and it must be published three consecutive weeks before the date of the auction. During this time and up till approximately five days before the date of the auction, you generally have the option to reinstate the mortgage by paying all the late fees.

Types of Foreclosures & the Process

There are basically two types of foreclosures: judicial foreclosure and non-judicial foreclosure. A judicial foreclosure means going through the court system and the homeowner is allowed to contest the foreclosure. A non-judicial foreclosure doesn’t require action through the court. The process of a non-judicial foreclosure varies from state to state.  It’s important that you contact a Foreclosure Lawyer in Florida to learn more information about your rights and responsibilities should you be facing a foreclosure, whether it is a judicial or non-judicial foreclosure. Regardless of whether the foreclosure is judicial or non-judicial, the foreclosure process includes the following steps:

  • Missed payments-This is generally the first step in the process of foreclosure. Once you begin to miss the loan payments, the mortgage lender will take the necessary steps to collect. What many homeowners don’t know is that the lender actually wants to avoid foreclosure, because it can be expensive for them to proceed with the process, so in the majority of situations, mortgages lenders will be willing to work with you to restructure your loan.
  • Public notice-Once you have missed a certain number of payments, which is generally 3-6, depending on the lender, public notice will be given by the lender. The public notice is basically a written notification to you (the homeowner) that your mortgage lender is going to pursue legal actions against you if the debt isn’t paid.
  • Foreclosure-Once the public notice has been issued by the lender, the process of foreclosure begins, and your home will be in the early stage of repossession. During this time, you generally have 90 days to take action against the foreclosure. You have a few options if you want to prevent the foreclosure, including selling the property in a short sale, sell the property to pay off the loan, pay the outstanding balance or sign the deed over to the mortgage lender through a deed lieu of foreclosure.
  • Auction-The auction, also known as a foreclosure sale, is open to the public. The auction may be done online, at the local courthouse, or at a gathering in a conference room that includes several properties being auctioned at the same time. At the time of the auction, a minimum bid is typically set for the balance that is owed on the loan and it will be sold to the highest bidder. In many situations, a foreclosed home that is sold at auction is typically a cash-only sale. In some states, the previous homeowner has what is known as a “right of redemption” which means they are allowed to buy the house back even after it is sold at auction. In this situation, you will be required to pay the sale price or the full balance of the loan as well as the interests and costs the bank/lender incurred during the process.

So what happens after the foreclosure? If you go through a foreclosure, it will go on your credit report and may reduce your credit score by a few hundred points or more. This may hurt your ability to get an automobile loan, a credit card, or even lease a rental property. Unfortunately, a foreclosure will remain on your credit report for about seven years; however, the impact it has on your overall credit score will be reduced over time. There are things you can do to prevent a foreclosure, but if it does happen, you can eventually mend your credit score by paying your bills on time, staying within your budget, and avoiding any new debts.