How Does "Home Foreclosure" Work?

If you are having trouble making your monthly mortgage payments, you may be wondering how the home foreclosure process works. The bank has several steps it must go through before you can be physically evicted from your house. Depending on the state, foreclosure proceedings may require the involvement of a judge and issuance of a court order.

The late notice from your lender is only the beginning of the home foreclosure process. The entire process can take months, so you do not have to worry that you will be suddenly out on the street. Remember that the bank does not really want to foreclose on your house. They would prefer to have you continue to pay the monthly mortgage payment, if possible. If you will not be able to catch up your late mortgage payments, but are able to resume paying the mortgage, the bank may be willing to work out a deferred payment plan. Some lenders will allow you to shift the late amount to the end of the loan rather than initiate the foreclosure process against you.

If there is no way to work out a payment arrangement, the bank will be forced to being the process of foreclosing on your home. There are two types of foreclosure: judicial and non-judicial. A judicial foreclosure takes longer because it requires a court order. The bank must go in front of a judge and prove that you are in default of the loan before they are granted the right to take the home. Regardless of the type of foreclosure, public notice of the home's upcoming sale must be posted. State laws vary on whether this notification must be delivered to the homeowner.

Depending on the type of foreclosure, the sale date will be set by either the bank or the court. The home will be sold to the highest bidder at a public auction. If no qualifying bids are received, title to the home will revert to the bank. Some state laws provide for a redemption period after the auction. This redemption period allows the borrower to pay off the mortgage and take back the home even after it is sold.