The Spiral Of Mortgageforeclosure

By Author: Scott F. Staudt
Total Articles: 91
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The last thing most homeowners want is to be caught up in a foreclosure, but what usually happens is that it catches them off guard, despite the warnings. No one plans ahead of time to lose his home; they always think they can buy more time to do something about the problem. But understanding how the foreclosure process flows will help the borrower avoid it.

Step one is when the first loan payment is missed. Usually a notice or letter reminding of the due date will be received. The homeowner should try to get the payment out as quickly as possible, even if it is late. If there is some question about whether he can pay it quickly, he should contact one of the bank's credit advisors.

If the homeowner misses another payment, the lender will usually make direct contact. Remember, if they have not heard from the borrower, they do not know if he is incapacitated or even dead! Do not ignore or avoid this phone call. The lender is still extremely willing to make arrangements.

The third month in a row that the loan is not paid means it is now in default. Now, the borrower will receive a certified notice ...
... giving the homeowner dates by which settlement must be made. This kind of notice is usually called a "demand letter" or a "letter to accelerate" and if no effort is made to pay or make some arrangements, the bank will usually begin foreclosure.

Many people, once they have reached this point, have actually given up on their homes.

So when the fourth month without a payment goes by, the lenderwill "call" the terms in the letter to accelerate. This requires lawyers, and of course that adds even more to the amount due to the bank. Now the home will be listed with the sheriff's for sale.

The date of sale is the actual date of the foreclosure. The lender is obligated to notify the homeowner, post notification on the house, and publish it in a newspaper. It is still not too late for the borrower to take back possession of his house, but it will be extremely expensive.

If you look at each of the steps leading to the foreclosure, you will see a common theme. At the conclusion of each step, the homeowner is encouraged to contact his bank. If you always keep your lender advised about your situation, and try to make arrangements, you can avoid the foreclosure process.
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