What Happens In A Mortgage Foreclosure?
If you fail to make your mortgage payments, the bank or other lender can sell your house involuntarily to recover the money you owe. A lender has a right to proceed in this fashion because of the security interest you have given the lender in the form of a “mortgage” or “deed of trust.”
Banks typically use foreclosure as a last resort because it is an expensive and slow process. However, banks will not hesitate to take this action if payments are not made over an extended period of time.
In a mortgage foreclosure, your home is ultimately reclaimed by the lender. A notice of default is typically the first document issued upon an instance of nonpayment. If you as a homeowner receive a notice of default, you have a certain period of time to cure the missed payments until the lender proceeds with foreclosure. Therefore, it is important not to ignore these and to take immediate action in order to stave off foreclosure.
Once the property is sold at sheriff’s sale, you as a property owner will have a period of time in which to redeem or reacquire the property from the lender. Your options become very limited once the property is sold, however, so it is critical to engage legal counsel before the sale takes place. Oftentimes a loan workout agreement can be effectively negotiated with the lender, or you may be able to sell the property prior to the commencement of the foreclosure.