For Your Clients – How Foreclosure Works

By Deb Gruver

RISMEDIA, Dec. 16, 2008-(MCT)-While foreclosure is an emotional and lengthy process, here’s a summary of how foreclosure works:

Homeowners first receive a letter from the lender’s lawyer that says they have 30 days to dispute that the mortgage is in arrears. Although a lender can declare a default one day after a missing payment, “realistically, you’ve got to be three months behind before they do anything,” said Bill Zimmerman, a bankruptcy lawyer.

After the 30 days has passed-assuming the homeowner does not dispute the default or otherwise show that all payments have been made-the lender files a lawsuit and sends a summons. The homeowner then has 20 days to respond.

If the homeowner doesn’t respond, a default judgment is filed with the court.

After a 10-day waiting period, notice of a sheriff’s sale begins. The notice must be published once a week for three weeks in a newspaper in the same county as the home. The sale typically takes place the fourth week, Zimmerman said.

Typically, the first bidder is the mortgage company.

“More often than not, they will bid the amount of the debt that relates to the mortgage,” he said.

If no one else bids, the lender gets the house and can then sell it. The homeowner’s debt is then paid. If someone else bids on the house, they get it and pay off the mortgage.

The homeowner, however, stays in the home after the sale during what’s called a “redemption” period. Under state law, the homeowner has a minimum of 90 days to buy back the house with a new loan or cash.

“They cannot be moved out during that period of time,” Zimmerman said, unless there’s proof the homeowner is trashing the property.