Stages of Foreclosure
Mortgage payment due today, the first of the month. Borrower misses it.
Late charges assessed on payment. Mortgage servicer starts attempting to make contact to find out what happened.
Servicer inspects the property for occupancy. Servicer will also solicit loss mitigation options to help cure the default.
Servicer sends “demand” or “breach” letter to the borrower pointing out that terms of the mortgage have been violated.
Servicer refers loan to foreclosure department. Hires local attorney or other firm to initiate foreclosure proceedings. Depending on the state where the home is located, the servicer’s representative may record a formal notice of foreclosure at the local courthouse, publish details of the debt in the local newspaper, attend hearings on the case and make appropriate court filings.
House sold at foreclosure sale or auction. Wide time range due to different state requirements. Those borrowers in non-judicial states (Tennessee) have as little as two months.
After the sale, others force consumers out immediately following the auction by eviction.
How Does Foreclosure Work?
A loan servicer, the company that accepts payments, disburses loan proceeds, maintains contact with the borrower and has very little flexibility in working through the foreclosure process. The timeframes mentioned below are meant to be a general rule of thumb, and do not apply in all situations.
Mortgage payments are typically due on the first of each month. If the payment is not made by the due date it is considered delinquent.
A late fee is usually assessed to the mortgage account after day 15. The first notice is usually mailed on the 16th of the month. You may begin getting phone calls at this time.
A loan enters default when it is 30 days late, and a second notice is sent at that time. This default date will have a negative impact on your credit score.
When a loan is 90 days past due, the lender may initiate acceleration procedures by sending a letter notifying the borrower that foreclosure is the next step. At this time the lender will only accept your total past due which includes: all past and current payments with late fees and interest.
Acceleration procedures include lenders refusing to accept any partial payments and requiring that the past due balance on the mortgage be paid in full, and can even mean that the lender will void any payment agreement and call the loan due in full.
Once acceleration begins, if you abandon the property or the property is red tagged, your home may be repossessed. This may include your locks being changed and your utilities disconnected.
Foreclosure proceedings can start any time after the acceleration notice is sent, but usually happens when the loan is 90 or more days past due. This is when attorney fees become a significant part of the fees due. Attorney fees will be added to your total amount due.
Foreclosure can happen in Tennessee either by judicial action or by newspaper advertisement (Sheriff Sale). The most common foreclosure action in Tennessee is by advertisement. In this procedure, the lender’s attorney advertises the property for sale in a general-circulation newspaper for three consecutive weeks. The sale date is listed in the advertisement.
Following the three week advertisement, the attorney sells the property to the highest bidder. The attorney or an auction company conducts the foreclosure auction and the winner will be the highest bidder.