What is a Foreclosure?
What Is A Foreclosure?
The foreclosure process initially occurs due to the property owner's default on paying the scheduled mortgage payment on the property. However, other circumstances can occur that trigger a foreclosure. Property owners may fail to pay their real estate taxes or an obligation related to the property. Additionally, the 
property owner may violate any mortgage loan agreement with regards to the encumbered property that warrants the lender to begin foreclosure. There are several reasons why owner's default on their mortgage payments but the main causes are divorce, death, loss of job, major illness, poor money management and adjustable rate mortgages.
Stages of Foreclosure
The first stage of foreclosure is called pre-foreclosure. The initial part of pre-foreclosure starts when the lender makes attempts to contact the borrower about the default. Beginning with the first month of default, the lender will contact the borrower by phone or letter. When the second month payment is missed the lender will likely call the borrower to discuss why the borrower is not making the scheduled payments. When the third scheduled payment is missed, the borrower usually receives a letter from the lender called a "Notice to Accelerate" This is a request by the lender for the borrower to bring all scheduled mortgage payments up to date. If the borrower ignores this Notice and does not make the due payment or discuss other arrangements with the lender then the lender can start foreclosure proceedings. Sometimes the lender goes for longer periods than three months but that is the lenders decision.
Preforeclosure
After the lender feels that the attempts at payment resolution with the borrower have failed, the lender's lawyers files the legal documents, such as a notice of default or a lawsuit of foreclosure. This legal filing is published in public documents such as the newspaper, sent to the owner of the property, and generally sent out to interested parties that have claims against the property owners. Usually it takes between 60 to 180 days from the time of legal filing until the date of the Sheriff or Public Trustee's Sale. The borrower can attempt to stay the Sale by filing a legal defense against the lender. Of course, just cause must exist for the claim to be filed. Bankruptcy filing can also cause an interruption to a foreclosure proceeding. The lender will be forced to petition the trustee to move the foreclosure forward.
Foreclosure Sale
The petitioning attorney will schedule a Sale after all defense methods are exhausted. This is the day of the Sheriff's or Public Trustee's Sale. The property owner may be notified of this Sale by mail or having a notice posted on the door of the property. At this Sale the property is auctioned to the highest bidder. Usually the winning bid is offered by the mortgage lender who has actually petitioned the Sale. The amount bid is usually a nominal amount above the unpaid mortgage balance plus late fees, accrued interest and foreclosure costs. The lender then becomes the owner of the property with a legal deed.
