How Countdown to Foreclosure Proceeds
Lenders are required to follow strict guidelines drawn by civil codes when tracking payments and initiating a foreclosure. Although lenders may vary slightly on their approach, what follows is a typical scenario of a foreclosure countdown.
Jan. 1--A lender does not receive the borrower’s mortgage payment.
Jan. 2--The payment is contractually considered late.
Jan. 15--A 14-day grace period ends. The lender sends out a late notice and tacks on a late charge--the civil code allows a maximum of 6% of the combined principal and interest payment.
Jan. 16-31--The borrower may receive one or more calls inquiring about payment.
Feb. 1--The lender sends another letter, this one more firm. A deadline is sometimes given, stating when foreclosure may commence (usually within two months) if payment is not received. The loan’s entire amount is sometimes given, should the borrower feel up to erasing his entire obligation.
Feb. 15--A second late charge is added. Phone calls to the borrower continue. Several levels of lender management may convene during the next month to reclassify the loan into one of several risk categories. Lenders tend to foreclose earlier on risky loans.
Feb. 15--March 31. The lender may visit the borrower at the property and may assess the house’s condition.
March 1--A third letter is sent to the borrower.
March 15--A third late charge is added. Phone calls continue.
April 1--A notice of default is filed (some lenders may wait until May, June and up to September; a few may file as early as March 1). A fourth letter is sent, stating a notice of default has been filed and that the borrower has three months to settle missed payments, late charges and accrued trustee fees before foreclosure commences. The notice of default is published weekly in an area newspaper for a total of four weeks. Borrowers are usually allowed to live in the residence during this redemption period, whether they make payments or not.
July 1--If no payments have been received, the lender can file a notice of trustee sale, scheduling a public auction of the property that can occur in as little as 21 days. The notice is published weekly during that period. It must also be posted publicly as well as on the property over the next 20 days.
July 16--Up to five days before the scheduled sale (assuming it falls on the earliest possible date, July 21), the borrower can cure the default by paying all past due amounts. To stop foreclosure during the five day countdown to a scheduled auction, lenders may require borrowers to pay off the entire loan, but most are satisfied with past due amounts.
July 21--The foreclosure sale is conducted at a public auction in the county where the property is located. The sale is to the highest bidder who must pay in cash or a cash equivalent.
