What Happens in a Foreclosure?
Foreclosure is the legal process a lender uses to sell a home after the borrower defaults. Federal rules generally bar servicers from starting foreclosure until a borrower is more than 120 days behind. States then use either a court-supervised judicial process or a faster nonjudicial process. Options to stop or delay it include loan modification, repayment plans, reinstatement, selling, a short sale, and Chapter 13 bankruptcy.
Foreclosure does not happen overnight. Knowing the stages gives you time to act.
Stage 1: Missed payments
After a missed payment, late fees apply and the servicer must contact you about loss mitigation options. Under federal mortgage servicing rules, a servicer generally cannot make the first foreclosure filing until the loan is more than 120 days delinquent (12 CFR 1024.41(f)).
Stage 2: Loss mitigation
You can apply for options such as a loan modification, forbearance, repayment plan, short sale or deed in lieu. If you submit a complete application more than 37 days before a scheduled sale, the servicer generally must evaluate it and cannot complete the sale while it is pending (12 CFR 1024.41). See loan modification.
Stage 3: The foreclosure process
| Type | How it works |
|---|---|
| Judicial | The lender files a lawsuit; you can respond and raise defenses; a judge orders the sale. Usually slower. |
| Nonjudicial | The lender follows a statutory notice process under a power of sale in the deed of trust, without court. Usually faster. |
States use one or both (Cornell LII). Notice and timeline requirements differ greatly.
Stage 4: The sale
The home is auctioned, often to the lender. Some states give a redemption period after the sale during which you can buy back the home.
Stage 5: Eviction
If you remain after the sale, the new owner must follow legal eviction procedures.
Deficiency judgments
If the sale brings less than the loan balance, some states allow the lender to seek the difference; others restrict deficiency judgments.
How to stop or delay foreclosure
- Reinstate: pay the past-due amount and fees.
- Loan modification or repayment plan.
- Sell the home or do a short sale.
- Chapter 13 bankruptcy: the automatic stay stops the sale, and you can catch up arrears over 3 to 5 years. See Chapter 7 vs. Chapter 13.
- Contest the foreclosure in court if the lender made errors.
Watch for scams
Never pay upfront fees to a company promising to save your home, and do not sign over your deed. HUD-approved housing counselors provide free help.
Talk to a bankruptcy lawyer or real estate attorney as early as possible.
Sources
Find bankruptcy lawyers near you
Thinking about Chapter 7 or Chapter 13 bankruptcy, or facing foreclosure or debt collection? Compare local bankruptcy attorneys by Google rating, reviews and office hours below.
Bankruptcy Lawyers by state
Tap your state to see listings by city.
This article is general legal information, not legal advice, and reading it does not create an attorney-client relationship. Laws differ by state and change over time; talk to a licensed attorney in your state about your situation.