How long does foreclosure take? Foreclosure starts when a borrower has not made payments on a loan for a property, and the lender takes steps to sell the home in an attempt to collect the money owed. However, there is more to it than that. Foreclosure requires several legal steps to be taken by both parties, so many new to the process are uncertain as to the timeline.
The foreclosure process begins when the borrower does not send a mortgage payment to the lender. The lender generally has a few letters or phone calls delivered to the borrower in an attempt to remind the borrower about the missed payment. When the borrower misses a second payment and doesn't contact the lender, the lender sends a formal letter to the customer, asking for a resolution.
If the borrower doesn't make arrangements with the lender after several missed payments, the lender will issue what is known as a demand for payment based on the mortgage paperwork's acceleration clause. This clause states that, if the borrower does not meet the terms of the loan (timely monthly payments), then the lender can demand the entire loan amount in full. At that point, the bank may accept alternative payment arrangements on foreclosed properties, but they are not required to.
When the lender starts the formal foreclosure process, certain legal documents are issued to the borrower. The lender sends a notice that they intend to foreclose, and then they start the process of court action to take possession of the property. Another step is to publish the notice in a local paper, as required by law. Shortly thereafter, a hearing takes place to grant the lender the right to foreclose, and the home is sold at an auction. Any money that is generated by the sale belongs to the lender.
In general, the foreclosure process takes about six to eight months. However, depending on how aggressive the lender is during the foreclosure process, it could be done in as little as two or three months. Other states may take much longer to even get to the legal foreclosure process. The time it takes to set up and schedule hearings through the court may also affect the timeline for foreclosure.
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Homeowners rights in foreclosure are designed to balance the homeowner's needs with those of the lender, but they vary depending on state laws.