How does foreclosure work?
Foreclosure is a process by which a lender that is servicing a mortgage loan repossesses the property and forces the borrower out of the home because he/she has failed to meet the terms of the mortgage loan, or has “defaulted” on their payments. The foreclosure process takes place in several stages including default, sheriff sale, and redemption period.
What is a default?
A borrower can default on their loan as soon as one month’s payment is late. The lender puts the borrower on notice that they have failed to make payments required in the mortgage agreement and is in jeopardy of losing the home by notifying the borrower that they are in default. Usually, there are short-term or long-term options that the lender and borrower can agree to that will resolve any problems. The sooner the borrower contacts the lender to address the problem, the better.
What is a Sheriff sale?
In the event the default is not resolved, the lender may take action to force a sale of the property. This is known as the “sheriff sale.”
What is a redemption period?
After the sheriff sale, the borrower typically has a “redemption period” of six months (twelve months for a farm) and can remain in the home during this period. If the borrower has been unable to refinance or sell the home during the redemption period, they must vacate the property.
I’m behind in payments, what can I do?
Contact the lender as soon as possible and find out what your options are. Be realistic about your financial situation. If you’re behind in your payments, consider the following:
· Find a reputable mortgage counselor
· Request a loan modification
· Refinance with a new loan
· Set up a repayment plan with the lender
· Ask the lender to waive fees or penalties
· Consider selling the home
What if I have other questions?
Call our office at (507) 526-2177 or Toll-Free at (800) 426-6967.
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