Question:

What happens when a bank forecloses on a mortgage?

Answer:

Let's take a look at the mortgage foreclosure process.

Foreclosure laws vary from state to state but in general there are certain procedures that are followed when a bank forecloses on a mortgage:

  • Firstly, there is the pre-foreclosure stage which basically starts when a person starts to miss his/her monthly payments.
  • Lenders will initially try to contact the person in this early stage to inquire about the missing payments.
  • It is not wise to ignore correspondence from the lenders at this stage because mortgage lenders will have to start formal foreclosure procedures if something cannot be worked out. Usually lenders are willing to work with the borrower (the cost of foreclosure is not small), but for that to happen, open, two-way communication is necessary
  • If a deal cannot be worked out between the mortgage lender and borrower then the lender starts formal foreclosure processes.
  • Official letters are sent to the borrower to notify him/her of legal proceedings against them and a court hearing will begin shortly afterwards.
  • After the legal process is complete, court will order the foreclosure of the house and foreclosure notices will be published in newspapers.
  • This will start the bidding process and the highest bidder will get the house. After that the original borrower can no longer stay in the house.

What to Do to Avoid the Foreclosure?

To avoid such a scenario, it is wise to communicate with the lender honestly. There are always options available to avoid foreclosure on homes.

  • The mortgage agreement should be read and re-read to fully understand the foreclosure process and its recourses.
  • If a person is facing a financial crisis he/she can make a case that this situation is only temporary and that person would be able to make the payments at a later date.
  • Refinancing options should be sought because it is possible that in an economic downturn a cheaper refinancing option might be available.
  • Professional advice is always helpful and to avoid foreclosures one should try to find the assistance of a real estate lawyer.
Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
Was this Mortgage QnA helpful?
Not at all
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA: