What happens if you go into Foreclosure?

What happens if you go into foreclosure? 

Facing foreclosure can be a very scary situation. If you found yourself in a situation where you had to skip several mortgage payments and you’ve received a foreclosure notice from your lender. Now what???  

Understanding the foreclosure process can help you decide what action to take. There are 6 phases of the foreclosure process that you as the borrower need to know:

Phase 1 – Payment Default

Payment default occurs when the borrower has missed at least one mortgage payment. After missing the first payment, your lender may begin to reach out via a letter or telephone. A late charge on your next payment may incur. 

After the second and even third month of missed payments, the lender will likely follow up via telephone. It is recommended to talk with your lender during this period! At this point, the lender may be still willing to work with you to make arrangements for catching up on payments.

Phase 2 -Notice of Default (pre-foreclosure)

A notice of default (NOD) is sent after the fourth month of missed payments (90 days past due). This public notice gives you the borrower 30 days to remedy past due payments before formally starting the foreclosure process.

Important: Generally, federal law prohibits a lender from starting foreclosure until the borrower is more than 120 days past due.

Phase 3: Notice of Trustee’s Sale

In Texas, the process for initiating foreclosure only requires filing paperwork with the necessary court to start the process. With this, the foreclosure process can move rather quickly. Other states have judicial foreclosures, which require court approval for each step—meaning the process takes a bit longer.

Once forms are filed with the court or necessary approval is met, the lender’s attorney or foreclosure trustee will schedule a sale of the property. A notice of trustee’s sale (also known as a notice of sale) is then recorded in the county where the property is located.

The time from the notice of demand to the auction date is only 21 days in Texas. Up until the date of the auction the borrower can still make payment arrangements or pay the amount due. However at this point your payment will include attorney fees incurred by the lender to start the process.

Phase 4: Trustee’s Sale

The property is now placed for public auction and will be awarded to the highest bidder who meets all of the requirements. The lender (or firm representing the lender) will calculate an opening bid based on the value of the outstanding loan and any liens, unpaid taxes, and costs associated with the sale.

When a foreclosed property is purchased at the auction, and a trustee’s deed upon sale has been issued, the purchaser is entitled to immediate possession, This often means you are not allowed to stay in the property.

Phase 5: Eviction

As soon as the auction ends and a new owner is named (either the auction winner or the bank if the property is not sold)—you will be issued an order to evacuate.

Several days may be provided to allow the occupants sufficient time to leave and remove any personal belongings. Then, typically, the local sheriff or law enforcement will visit the property and remove them and impound any remaining belongings.

The conclusion is this: Foreclosure is the atomic bomb on your credit. It comes with 7-10 years of potential garnishment of wages from your lender for potentially the full amount of the loan, the IRS coming after you for back taxes, creditors calling you day and night, not being able to get a loan on a car, house, or even credit card. You want to do everything you can to avoid foreclosure and time is of the essence! 

If you are facing foreclosure do everything in your power to prevent it. Call your lender immediately to inquire about foreclosure prevention options they have available. Lenders are often willing to work with you. Time is of the essence. If you need help in this situation, we’re here to help. Call us now!

Call us today at 903-231-3927
-Flippin A Renovations Team