How the Foreclosure Process Works

There are three general foreclosure phases – the initial default stage, the foreclosure lawsuit and post-lawsuit issues including how to stop a foreclosure sale and possible appeal of the judgment.

First Phase of The Foreclosure Process

The first phase of the foreclosure process starts after you miss a few monthly payments and the lender sends past due letters which progressively get more threatening and culminate with a formal notice of default giving you a final chance to resolve the past due balance within a specified number of days.

The final Notice of Default in a non-judicial sale state may be the only notice you receive so review all correspondence carefully for any indication that the property is moving to foreclosure sale.  In a judicial sale state, the final notice of default must contain specific language and comply with the exact requirements listed in your note and mortgage so be sure to retain copies of all correspondence from the lender for later use as a defense in your foreclosure lawsuit. Judicial Sale v. Non-Judicial Sale States 

Understanding the requirements for the notice of default as well as the difference between important loan documents like the promissory note and mortgage or deed of trust is essential to protecting your foreclosure rights and developing a foreclosure solution that works for you.  Difference Between the Promissory Note and Mortgage

It’s also important before going much further to figure out who actually owns your mortgage.  As you’ll read in our recent blog Who Owns Your Mortgage and Why Care? the answer is typically very complicated and it’s possible that a lender offering a loan modification and accepting your payments is not the true owner who may file their own foreclosure lawsuit later in the foreclosure process.  For those of you with a second mortgage in foreclosure the same principles apply in making sure you’re dealing with the proper party.Your Second Mortgage in Foreclosure

In reality, few if any homeowners can make large payments to resolve past due balances when they couldn’t make the original monthly payments but the first stage of the foreclosure process is still a valuable time to negotiate with lenders for either a Loan Modification or Short Sale.  Regardless of the outcome of your negotiations during this foreclosure phase every month a foreclosure lawsuit is delayed is another month to save money otherwise used for mortgage payments.  Learn About More Foreclosure Options

This is also an important time to figure out if you have Mortgage Insurance which greatly increases your chances of avoiding foreclosure.  If you have mortgage insurance be sure to read our post How Mortgage Insurance Can Help You Avoid Foreclosure.

There are no guidelines as to when your lender will stop negotiating and file a foreclosure lawsuit so be prepared to implement your foreclosure plan to stop the foreclosure sale at any time.  Generally the longer you keep lines of communication open and continue to work with the lender towards modification or some type of assistance, the more likely the lawsuit will be delayed. In many circumstances, however, the lender will  continue working with you while filing the foreclosure lawsuit – a process known as dual tracking- so don’t trust the bank unless you see it in writing.

Second Phase of The Foreclosure Process

The second phase of the foreclosure process begins when the bank files the foreclosure lawsuit and personally serves you with a copy of the legal papers. You’ll probably be served at home and it’s much better to answer the door and accept the papers than avoiding the process server hoping it will delay your case until they find you. What will likely happen from your hide and seek skills is that the nasty bankers will just “serve” you by publishing notice of the lawsuit in a local newspaper which may prevent you from filing your response on time and give your neighbors and friends too much information about your personal matters.  Dangers of Foreclosure Stress

If you can afford to hire an attorney now is the time. Depending on the state you’re in and how you were served with the lawsuit, the response is typically due in either twenty or thirty days and a qualified lawyer with foreclosure defense experience is in the best position to help. The attorney will also make sure you don’t miss filing deadlines or overlook any important legal defenses you may have.  Read About Possible Foreclosure Defenses

However if you can’t afford to hire an attorney don’t worry because we provide everything you need to help yourself.  In addition to information you need to choose which foreclosure option is right for you, also gives you the Sample Documents needed to implement each option. See How Can Help Fight Foreclosures

If you decide to fight and defend your own foreclosure lawsuit, we offer sample legal documents and forms to help you get started.  If it’s a short sale, loan modification or deed in lieu of foreclosure you’re looking for, you’ll find all the letters and forms needed to do so.  See More Sample Documents

Overall what happens in this foreclosure phase depends on what you’re trying to accomplish. If you were misled or taken advantage of by the lender, or if the wrong party is trying to force a foreclosure sale when they don’t own your mortgage you may have no choice but to defend your own foreclosure lawsuit. If your case is strong enough against the lender, you may find an attorney willing to defend the suit and file a counter-lawsuit against the lender for a percentage of what you win in damages. Strange But True Foreclosure Stories

If you can’t find an attorney willing to take the case for a percentage of the recovery with no upfront fees, you have no choice but to defend yourself so read on and get educated about the foreclosure process.  We’re here to help so you’re not alone and you’re not giving up without a fight! It’s your home and worth whatever it legally takes to keep it.  Don’t Let Foreclosure Stress Control Your Life

Final Phase of The Foreclosure Process

The final stage in the foreclosure process is the post-lawsuit phase if the lender has won the case either by summary judgment or after a final hearing. The next step for the bank is setting a date for the sale and holding the auction either at the courthouse or online depending on which state you’re in.

Due to the huge number of  Florida Foreclosures, we have dedicated a significant portion of our site and provided extensive detail on the Florida Foreclosure Process and Defending Florida Foreclosure Lawsuits where most auctions are now being held online.  Florida is Ground Zero in the Foreclosure Battle

Another important issue during this final foreclosure phase is avoiding Deficiency Judgments which is the difference between your loan amount and how much the property sold for at the foreclosure sale. Even at this late stage, all hope is not lost as you still have options to stall the foreclosure process and stop foreclosure sales. We have discussed foreclosure alternatives in detail in our Foreclosure Options section, including filing Foreclosure Bankruptcy which will immediately stop foreclosure sales and significantly delay the foreclosure process overall or negotiate a Deed in Lieu of Foreclosure with the bank.

Depending on the facts of your case you may have strong grounds to appeal your case. Although filing notice of appeal may not stop foreclosure, it will preserve your rights and may result in getting your home back even after the sale if you win the appeal. Additionally, you can always continue to pursue loan modifications and short sales until the property is actually sold as well as having a friend or relative purchase your property on your behalf at the auction and foreclosure sale.

Related Content:

Strategic Default to Beat the Bank

Florida Foreclosure Process

Florida Foreclosure Lawsuits


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