The foreclosure process can be confusing. Many individuals are left not knowing exactly how the process works. Here is a month by month estimate of what happens to give you a better understanding of what happens. Remember that each situation is unique.
Month 1
Day 1 – Mortgage payment is late
Day 15 – Late fee charged if not yet paid
Month 2
Day 30 – Collection calls begin, loan is now in default status
Day 45 – Late charges accrue
Month 3
Day 60 – Lender gives deadline to bring all months current
Day 61 – If you have a conventional mortgage, the loan is sent to attorneys for foreclosure to begin
Month 4
Day 90 – Mortgage payments 1-4 are due
Day 91 – If you have a FHA mortgage, the loan is sent to attorneys for foreclosure to begin
Day 100 – Borrower receives acceleration letter from attorneys. ‘30 day intent foreclose’
Month 5
Day 130 – Acceleration letter expires. Foreclosure by advertisement runs in the paper for six weeks. The borrower now has that period to pay back all late payments. Attorney fees are added to the arrear of loan
Day 144 – Occupant of the property will be served with notice of foreclosure
Month 6
Day 174 – Final day to pay back arrears
Day 175 – Sheriff’s sale occurs at the courthouse in county where property is located
Redemption Period
The redemption period usually is 6 months long, there may be exceptions. During this period the owner has a couple of options, they can either sell the house or refinance to try and remain in the property.
Day 355 – If the loan is not paid off in full or possession is not kept, the owner must surrender the property
As you can see the process takes close to a year. If you are behind on payments, the best thing to do and do it right away is contact your lender. They will work with you to restructure or modify the loan. The longer you wait, the less and less chance you have of the lender doing so.
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Thta’s not true with the lender because I had called the lender at Wellsfargo to lower my interest rate and he had said no because my house wasn’t worth what I bought it for. So now it’s going to foreclosed
This is just a general timeline.
It’s unfortunate that Wells Fargo was unwilling to work with you on your workout. I have heard stories of Wells Fargo being stiff on workouts, for example: they will not let people defer payments or not making loan workout programs accessible enough.
Just because you call, doesn’t necessarily mean that they are obligated to lower an interest rate.
That is why it is so important to contact them before problems start to occur.
I have not paid Association dues in 4 months they have sent me letters that they will put a lien on the Condo–I am in foreclosure and a sheriffs sale is scheduled to Nov 7 –do I need to keep up the Association dues or will they cut off the sewer and water?
The association can actually foreclose on the property as well. Not quite sure if they can shut off the water for that is coming from the city and would have to be shut off at the street.
I would talk to your association about a repayment plan. Keep in touch and let them know the situation you are in, the worst thing to do is let things go.
Have you talked with your lender about workout options?
My parent’s refinanced their home last year to pay off some other debts. They didn’t realize they couldn’t possibly make their new house payment (both suffer from dementia, my father being recently diagnosed) and moved into a seniors complex. I have been trying to sell the property without much success and am now currently in the process of doing a deed in lieu with Wells Fargo (their lender). The problem I am now facing is in order for the deed in lieu to go through, the title for the property needs to be clean, which I am unsure if it is. I know that the taxes haven’t been paid as my parents can’t afford to pay them. If this deed in lieu doesn’t go through, what happens then? Foreclosure? And what, if anything, will my parents owe and to whom? I’ve been going crazy with this whole mess and really need advice.
@Karen
Do you know how much there are in unpaid taxes? If it is not that much, it might be worth paying for clear title and have the deed in lieu with Wells Fargo go through. You can always contact a title company or attorney’s office and have them perform a title search/title examination. Having any lender consider a deed in lieu is better than most, those are usually harder to get approved. I am curious to know of what kind of help Wells Fargo’s has been, what are they saying has to get done.
Foreclosure is foreclosure, I would try and avoid it of course but there are always underlining circumstances that might make it the best thing to do. It will be on their credit report for awhile. Don’t know their position on purchasing in the future but that would be affected of course.
If you are unsure of what you are dealing with, you might want to seek legal advice.
My job has transferred me out of state and we have our house for sale. The problem is that we owe more than the house is apparently worth (or at least what the market will bear). We have received an offer but would have to come up with in excess of $40-45,000 for the closing. We do not have that money and have tried to arrange a deal with the mortgage companies (we did an 80-20 finance deal when we bought 5 years ago) but neither (Bank of America and CitiBank) are willing to arrange a loan. We could max out our credit cards with cash advances to come up with the money but I feel we would be cutting off our nose to spite the face. Is it better to just walk away? We have kept current on the mortgages so far but will not be able to do so once we move. Can we just walk away?
@Rob If you have your house listed with an agent, chat with him/her. They should be able to point you in the right direction.
Neither of the banks is willing to do a short sale huh? It might be a little difficult to walk away with an offer on the table and you might want to talk to an attorney (sorry, I’m sort of handcuffed with advice being the Code of Ethics).
I completely understand the situation with throwing ‘good money after bad’ though.
Have you ever heard of the IRS charging taxes on the amount you owed on your bank loan at the time of the foreclosure? I have a friend that told me the IRS is saying that the amount he owed on his loan at the time of foreclosure is considered taxable income. Is this true?
@Jane There’s many tax implications that come with a short sale, the IRS sees the difference of the loan amount owed and sales prices as a taxable income, thus a 1099 form ‘might’ find its way to a mailbox. Think of it as a ‘ghost tax’.
The bank might also try and get the borrower to sign a promissory note of a predetermined amount payable over X amount of years. From my recent experience with short sales, the banks aren’t just letting borrowers walk away anymore not owing anything on a short sale, they too want some sort of participation in the loss.
Well my parents had already missed 4/5 months of payments, and then paid a couple grand to post-pone the sheriff’s sales, they’ve then contacted the lender to work something out, and it sure took them a while to respond ( 4 months ) and in there response it said that my parents didn’t qualify for help because they happen to beleive my parents make enough. Now would a hardship letter be that of any help? they were also given the option of paying another $1,300 i believe to push back the sale again for another three months, then they would try to apply again for assistance. Now is the positive thing to do? What would you do to avoid foreclosure at this point. What can I do to help them please? I don’t want my family to be out on the streets, or squeezed into a studio. Please………..
Typical timeline from the lender with four months to respond. Who is the lender by the way? If it is IndyMac/OneWest good luck. I wouldn’t pay anything more until you get something in writing. Throwing money out the door in *hopes* of the lender extending/postponing the sheriff’s sale seems odd if they are this far behind or they are just trying to get some money before they foreclose.
Are they able to rent?
My house is in foreclosure. The sheriff’s sale was July 9. Someone from the bank stopped by last month and told my roommate we have to be out Jan 4. But I haven’t received any paperwork regarding the “final day.” Is this normal to not receive any formal paperwork?
thanks!
unfortunately nothing is *normal* these days when it comes to banks
My husband works out of town 8 mnths out of the year. We have been wanting to sell or house, but it s worth 25,000 less than we owe. We have been staying here hoping that it woukld at least break even, but that is not happening. The kids and I would like to travel with him, but it is not possible finacially. Our biggest downfall was purchasing a cabin 2 yrs ago before we knew he would be traveling. We still have a mortgage on that. We also have a rental home 3 hrs away which we do not owe anything on. We would like to just sell and stay in our rental home when we are not traveling. We have some other assets, 2 4wheelers, camper, truck, car that we paid off. If we go for a short sale, will they come after our assets….do we qualify for shortsale in the state of mn?? If short sale does not happen and we go into forclosure, is there a large sum of money we will have to owe. We have bank of america. We are current on our payments, but are struggling for this month’s! Please, i need advice!!
@Heather
In a short sale, you *might* be liable for the difference on the loan amount, make sure you get a satisfactory of the mortgage when you close if you go that route. Some banks now are not forgiving the difference on loan amount and it has been a struggle to get them to go along with it. They sort of have the mentality now like this: If we are going to lose out on this, the borrower is going to participate in the loss as well. I just had a client short sale a house with $50k loss, the lender (wells fargo) wanted the borrower to come to the table with $20k, we were able to get it reduced to just $5k.
To qualify for a short sale, you must provide proof of a financial hardship: bank statements, investment statements, pay stubs, W2’s, et al.
If you truly are having problems paying on a month to month basis, you should first and foremost contact the lender and let them know your situation. Be open about it and don’t hide anything.
Last May we contacted a modification company and were advised to stop paying on the mortgage. We did that and I have been in touch with them regularly hoping to get something going. Our income has improved and we can make payments again, even some of the arrears. However, Bank of America is apparently so backed up that they served us a notice of foreclosure. Apparently, they determined that our debt to income ratio would not support deal. We have updated all of our information, working through the modification firm and we are waiting for a decision. The sale is March 11. I am being assured by the modification folks that the sale will be postponed while they review my file. Is this true? Is there a better strategy we can employ?
Bank of America has been a nightmare to work with on numerous occasions…
Who is the loan modification company?
I tried to work with Citimortgage for months and months and didn’t get anywhere. I submitted and resubmitted a million times and left message after message for the Loan Modification Specialist assigned to me without returned calls. I have 6 pages of documented calls and have just finally given up. I received notice from the attorney for the 30 day notice before the foreclosure notice hits the paper. According to several realtors contacting me, my sheriff sale is set for April 6, 2010 and I still haven’t been formally served. I checked the local notices and it is indeed set for April 6, 2010. I thought in MN they had to personally have a sheriff serve you with notice of sale date???? Should I contact the attorney office and tell them I never received anything? Do they have to relist and start over at that point?
Thanks for any help you are able to give ~ Traci
To Jason:
Home Rescue LLC. The sale was postponed to April 13. Bank of America is at least talking with them. However, no movement on a modification. Any advice?
@E. A.
Just make sure you don’t pay an upfront fee or only pay on a successful modification.
my home was in foreclosure why in still in redemption period they sold my home change my lock and put me and my kids in the street, i was told by the lender they was working with me and i didn’t have to move, also the home is a side by side i live in one and rent out other, the side i rent got damage bad that it came over to my side well ins came out side they pay to have work done so they send checks to lender i was told by lender once property was done the other money will go for back payment of the loan so i’ll just start making my new payment, but they sold the property kept the ins money, now they taking me to court because new owner can’t get title, by the way the new owner the people that sold it to me, they got it back for $100k less then i paid for it with the same company. HELP PLEASE
I am letting my property foreclose because my fiance has cancer and we can no longer afford the payment. There was a benefit held for him recently were he recieved a good chunk of money for his medical bills, I set up an account under my name for him to put the money in and keep it seperate. I know when you file bankruptcy the credit card companies can take money out of your bank accounts, is that true as well for forclosure?
@Melinda
Sorry to hear about your current situation, I hope everything works out for the best. I know what its like to have a loved one with cancer.
Regarding credit card companies dipping into accounts: They can’t just go dipping into accounts and pulling money out unless you have a checking/savings account at a bank along with a credit card at a same bank (ie Wells Fargo checking account with a separate WF credit card. That is the only way they would do that ONLY because it is somewhere in the fine print they can exercise their right given the terms of the credit card contract, I’m not sure if all banks to that or not but I have heard stories. So if you have a Capital One CC, I don’t think they can dip into a checking account at WF unless for some reason they decided to take legal action.
You have done the right thing with opening separate accounts, if you are worried make sure they are at different banks to be safe. Unfortunately I can see that being a hassle.
As a consumer though, you have plenty of rights and protections under the FDCPA (Fair Dept Collections Practices Act), maybe worth a look into.
Hi Jason:
I am a MN condo owner with an FHA first time homebuyer loan through Wells Fargo. I bought at the height of the housing fiasco in 12/2006. Due to multiple foreclosures in my area and on my property, the unit I bought at 129K is now worth 55K.
I still have 127K on that loan. I have been told by many friends that there is no sense in my working a part time job in addition to my full time job to pay my mortgage because I’ll never sell the unit for what I bought it at due to the inflation that was happening when I bought into the housing market.
I have above average credit. I’ve never in my life missed a payment on anything. Should I walk away from my unit? Can the association come after me personally after a foreclosure to attempt recoup unpaid dues? I was thinking of just paying the association dues until I am out of the unit, but another friend said that is a waste of my money.
Thanks for your column, it is incredibly helpful. And for the record, as a first time homebuyer, this has been a nightmare!
I have similar situation with Megan. I was out of my place long time already. I didn’t pay my association the same time with my mortage. The assciation was go after me. They took all of the money I had in checking account, which was more than 500. My place got forclosure already, they sent me the bill with all the fee for the process of forclosure, and all of the payment I did’t make for the mortage. I don’t know why the bank still charge me for the monthly mortage since everything is done. Now I’m in dept of my forclosured place with more than 21k and the association of more than 2k. I didn’t do anything or make any payment. So can anybody tell me what should do now, and explaint to me why the bank still charge me the monthly mortage. Thanks a lot.
My husband and I got behind in our mortgage with Wells Fargo. For the past 2 1/2 years we have been trying to get into a modification plan. They did put notice in the paper when this first started, but then did a postponement. My question to you is: now that we have not been able to qualify for any modifications will the whole process start over or will they speed up a new sherifs sale? How long do we have to be in our home? I have a special needs child and am very concerned about this.