Here is the process, summarized below:
- Miss a payment. Usually the borrower has a grace period of maybe 15 days before incurring a late fee.
- Miss a few payments, and the borrower should get a few calls and letters from the bank. If the borrower is inclined, the bank will try to work out a payment plan or some other solution to keep the loan out of non-performing status.
- Breach Letter – Lender sends a Breach Letter or Demand Letter stating that the borrower is in default.
- 90-Day Notice – Lender must send a 90-day notice, for primary residences, that foreclosure will begin in 90 days.
- Foreclosures – Lender files a complaint in court. Lender’s attorney must affirm that the complaint is accurate. Borrower is served with the complaint and a summons to respond in 20-30 days.
- Within 60 days of serving the complaint a settlement conference must be arranged to allow the borrow and lender to work out a solution to avoid foreclosure.
- If the borrower does not respond to the complaint the lender should receive a default judgment and win the case. If the borrower does respond, the lender will request a summary judgment.
- If the lender has prevailed in court, then they must publish a notice of sale for 4 weeks.
- Reinstatement – The borrower can pay what is owed any time before final judgment to reinstate the loan. The borrower may also reinstate the loan before the sale.
- The Foreclosure Sale – The property is sold to the highest bidder or becomes the bank’s property.
- Deficiency Judgments – If the borrower owes more than the property is worth, the lender can seek a deficiency judgment for the difference.
- Eviction – If the borrower does not vacate after the sale, the new owner can offer cash for keys, or evict. Eviction requires a 10-day notice.
Short Sales would occur prior to Foreclosure