What are the Steps Banks Take Before Filing for Foreclosure?

Foreclosure can be a long, confusing, and frustrating process for both the lenders and the homeowners – more so for the homeowners who are faced with losing their homes. And what further complicates matters is that different states and jurisdictions have different procedures and regulations for foreclosures.

Assuming your foreclosure is not interrupted by a loan modification program, foreclosure proceedings (generally speaking) go like this:

1. Notice of Late Payment

Banks will not even bring up the topic of foreclosure if you are making your payments on time. Should you miss a payment, though, is when they start taking interest. Generally, you have 15 days after your due date to pay the payment without penalty. After the 15^th day, your lender may hit you with a penalty. Nothing is generally done, though, until after at least 30 days have passed.

2. Notice of Default

The next step is a Notice of Default, a formal, public notice that the borrower on the loan has missed payments and is not paying off the loan on time. Typically, this will not be filed until at least 60 days after your first missed payment. Some states allow for two missed payments; in others, like California, lenders wait until 90 days after the first missed payment. States may also require a 30-day notice before filing the Notice of Default.

Homeowners usually have 90 additional days to bring the payments up to speed, plus late fees and interest.

3. Notice of Sale

The final step is a Notice of Sale – an official statement that the lender intends to sell your home at auction to the highest bidder. This is formally the beginning of the foreclosure process; up until this point (and sometimes even a bit beyond it) you can pay the balance and extra fees and keep your home.