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What to Expect As You Go Through the Pre-Foreclosure Process

What to Expect As You Go Through the Pre-Foreclosure Process

What is pre-foreclosure?

It’s a series of events between going into default on your mortgage and the bank repossessing your home.

Pre-foreclosure is a warning period where your lender makes it clear they intend to foreclose on your property unless you can rectify the situation.

Here are the steps involved in the pre-foreclosure process.

What Happens During the Pre-Foreclosure Process?

There are three basic stages of the pre-foreclosure process: you go into default, your lender shows intent to foreclose, and your home goes up for sale at auction.

You Go Into Default & Receive Notice

You can technically be in default if you miss just one mortgage payment. Many lenders don’t consider a payment late until after the grace period has ended. However, serious action is not usually taken until there have been 90 days of delinquency.

If your due date and grace period pass without a mortgage payment, your lender will likely charge a late fee and send you a warning. If this happens two months in a row, you may get a demand letter requesting you make up the missed payments or legal action will be taken. You’ll be given some time to come up with the money.

Once you miss three mortgage payments, your bank may issue a notice of default, signaling their intent to initiate the foreclosure process. At this point, you still have a chance to address your delinquency and reinstate your loan. However, after 120 days without payment, your lender can legally begin foreclosure.

Your Lender Shows Intent to Foreclose

The court will get involved with your mortgage default if your lender pursues a judicial foreclosure. This is where your bank files a lawsuit against you to repossess your house. Your lender may also have to prove you were offered loss-mitigation options before they filed a lawsuit in court.

You have the right to contest the foreclosure and offer your defense. A judge will review evidence on both sides and possibly hold a hearing. You might even be able to agree to a plan with your lender before the hearing begins. But if no settlement is reached, and the court rules in the bank’s favor, your property can be sold. 

A non-judicial foreclosure can move much faster. If your lender pursues this option, they will seek out a foreclosure trustee to move forward. Depending on your state, the bank may only be required to give public notice in the newspaper. If you want to contest a non-judicial foreclosure, you have to file a lawsuit against the lender.

Your Home Is Put Up for Sale

A notice of trustee sale will be recorded with the county that includes details about your property as well as the place, date, and time of the sale. The sale must be advertised for a few weeks before the event. The trustee sale is usually done through an auction at the sheriff’s office. 

The highest bidder (or buyer most likely to close) will be awarded your home. If there’s no buyer interest, the bank will use other methods to try to sell your house at a later date. Either way, your home is now officially foreclosed, and you will likely be evicted by the new owner or the lender.

What Can I Do to Get Out of Pre-Foreclosure?

The good thing about pre-foreclosure is that you can prevent foreclosure at just about any step in the process. Though your credit score will likely take some hits because of the late payments, it won’t be nearly as damaging as a foreclosure.

Here are ways to get out of pre-foreclosure and stop foreclosure.

Make Up Missed Payments

You can catch up on your missed payments and get out of default. You’ll also be required to pay for penalties and late fees. Your regular payments will be expected on a normal schedule.

Ask for Loan Modification 

Your lender may be able to work out a loan modification with you. This could involve lengthening the term, deferring part of your payment, shortening the rate, or making it easier for you to pay in some other fashion.

Obtain a Deed in Lieu of Foreclosure

A deed in lieu of foreclosure means your lender now owns the home, but you are absolved of the debt. Your credit score won’t be hit as hard, but you’ll still be evicted and lose your home.

Sell Your Home in a Short Sale

In a short sale, you sell your home for less than what you owe the bank. Many lenders will go along with this strategy because foreclosure takes a lot of time and money. Your credit will be okay, but you still don’t have a home anymore.

What to Expect in the Pre-Foreclosure Process

Now you know what happens during the pre-foreclosure process.

When you fall behind on a certain amount of mortgage payments, your lender can begin taking the pre-foreclosure steps that will ultimately end with the loss of your home. 

As mentioned above, you can sell your home during the pre-foreclosure process and avoid foreclosure. A cash buyer like New Again Houses can make you a fair offer and close quickly. Contact us today!

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