How Do Foreclosures Work?

Most people think foreclosure is like a light - it's either on or off - it's either foreclosed or owned by occupant. But foreclosures are actually a process that is fairly detailed and they have definitive timelines. Since we live in a cold climate, our timelines are mandated to be a bit longer so no one is put out unexpectedly in the wintertime with no place to go.

Basically when someone buys a home, they sign a mortgage with a bank. That mortgage is an agreement with the bank, that the owner will occupy the property and pay their mortgage every month. And the bank owns the majority of that property - often 80% or 90 %, in decreasing amounts as the loan is paid down.

If the owner does not keep their part of that agreement that states they will pay their mortgage every month, the bank reserves the right to take the house back. This begins the process of foreclosure.

Here are the basic steps in foreclosure, all of which may be stopped at any time by catching up on payments plus accrued late fees, legal fees, etc.:

1. The owner misses a payment
2. From now forward, bank reserves right to accept partial payments
3. The mortgage company calls and sends a letter (or multiple letters) to the owner
4. The owner misses another payment
5. The collections department continues calling and writing
6. A letter of 30-day default is mailed to owner
7. The owner misses another payment
8. The collections department persists
9. Foreclosure department gets involved
10. "Notice of Intent to Foreclose" is mailed to owner
11. The owner misses another payment
12. The owners mortgage account is forwarded to their foreclosure attorney and legal fees are now added in
13. Foreclosure attorney notifies homeowner
14. The owner misses another payment
15. Foreclosure attorney sets up Sheriff's Sale
16. Sheriff's Sale information is published locally for six consecutive weeks
17. The owner misses another payment
18. Notice of Sheriff's sale is served to owner (4 weeks before actual sale)
19. The owner misses another payment
20. Sheriff's Sale is held and deadline to bring mortgage current
21. Begin redemption period (6 months) where homeowner retains the right to payoff entire debt to mortgage company including late fees, attorney fees, etc. During this time, homeowner may still occupy the house until the end of the redemption period then vacate or face eviction.

Keep in mind, this portrays and AVERAGE time frame. Actual processes vary by lender (i.e., Wells Fargo, Citi, Greenpoint, GMAC, etc.). Call your mortgage company for their specifics.

Call or email us if you have any questions about Foreclosures - we are happy to help!

Direct Line: 612-644-5380
Email: homes@greatminnesotarealestate.com