How does foreclosure work?

Short answer

Foreclosure is the process a lender uses to collect the debt from the home after missed mortgage payments. The process differs by state and is generally judicial (through a court) or non-judicial (without a lawsuit). There is no single national timeline.

Full explanation

is the lender's action to collect what is owed by selling the home after the borrower stops paying. State law controls the process. The CFPB describes two general paths. In a judicial action, a lawsuit is filed and the borrower can present defenses in court. In a non-judicial action, the holder follows a notice sequence under a sale power in the security instrument instead of filing a case. Federal rules may also apply. State processes require that borrowers be notified.

The process often begins after a few months of missed payments, but it can start earlier or later. After required notices and procedures, the property is generally sold at a public auction to the highest bidder, which can include the lender. Some states provide a right to mediation. Read mail and legal notices and act promptly.

Do not wait for foreclosure to start if you are having trouble paying. The CFPB points to HUD-approved housing counselors. If you have been served with legal papers, you may need an attorney. Military members and veterans can also contact the Department of Veterans Affairs or a JAG office. This is a general description, not a prediction of what will happen in any state or on any loan.

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