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Chronology Of A Foreclosure
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Published: June 27, 2008
Missed Payments: A lender will typically charge a late fee when a mortgage payment is overdue, usually at the 15-day mark. Collection calls follow, but banks don't want to foreclose – it's a losing proposition for both sides – and some may be willing to restructure the loan. Foreclosure proceedings are usually initiated when at least three mortgage payments are unpaid.
Site Surveillance: At the first sign of missed payments, the lender may contract with a mortgage field service company to establish whether the home is occupied. Many distressed homeowners flee. Abandoned homes become neighborhood hazards, and ensuing damage could devalue the property.
Lis Pendens: The literal translation is "suit pending." This is the formal notice that starts the foreclosure process, although the homeowner retains possession until a court declaration.
Foreclosure/Eviction: The mortgage company requests a court judgment against the homeowner, which is rarely contested. When the judgment is entered, usually within 30 days of the filing, the court issues a Final Notice of Eviction/Execution, which is posted at the home by a deputy. The notice gives the homeowner 24 hours to vacate, although deputies are generally loose with the deadline. The deputy then returns with a Writ of Possession, which gives the lender the right to clear out anything left behind. The property is then scheduled for sale at auction, usually within 30-90 days. Unless there is significant equity in the home, the lender typically buys it back for a nominal bid. The house then becomes "real estate owned," or REO, on the bank's books.
Securing the House: The bank or its third-party REO specialist changes locks on the property, boards windows and mitigates other potentially dangerous situations. A "trash-out" may be ordered, in which abandoned property is removed from the house to the curb and eventually to a landfill.
Rehabilitation: The bank must decide whether to make improvements to the home, increasing its value, or selling "as is." REO transactions used to be targeted toward handymen or investors who could make repairs and improvements then turn a tidy profit, but more lenders are opting to return properties to mint condition and downplay the repossession.
Resale: Lenders typically contract with Realtors to market the property.
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