A foreclosure occurs when a property owner cannot make a payment on the principal amount and interest associated with his or her loan. After so many months of non-payments, the property is seized and taken over by the lender. The foreclosure process is not very difficult to understand in general terms, but a lot goes on from the time it starts to when it ends. There are several stages during which the homeowner or the borrower has an opportunity to bring the loan current and avoid foreclosure.
After about three to six months of missed payments, the lender sends a Notice of Default (NOD) to the borrower. This is essentially a notification to the homeowner that they are getting dangerously close to foreclosure. Before the home is auctioned off there is an opportunity for reinstatement and even when you have an NOD, all hope is not lost. With the housing market in so much turmoil, many states are allowing the NOD process to be delayed for a much longer period of time than what used to be the standard.
In order to stop the foreclosure process, the loan must be brought current. If the default is not corrected within a few months, then a foreclosure date is established. That’s when the owner receives a Notice of sale and that will be posted on the property. Additionally, the Notice of Sale is recorded at the County Recorder’s Office in the county where the property is located. Last but not the least, this Notice of Sale is also published in local newspapers for over a three week period. The time and location of the sale are mentioned in the Notice of Sale.
At the Trustee Sale, the property is auctioned publicly to find the highest bidder, who must pay the high bid price in cash, typically with an up front deposit and the remainder has to be paid within 24 hours. The opening bid on the property is set by the foreclosing lender which is usually equal to the outstanding loan balance plus interest, and any additional fees and attorney fees. If there are no bids higher than the opening bid, then the property is deemed as a REO or Real Estate Owned.
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