The #1 thing that most real estate investors and homeowners facing foreclosure want to know is: “what is the timeline for foreclosure?” In other words: “how long does it take?” The answer is that the mortgage foreclosure process and timeline varies from state to state. This article provides the information and resources that you will need to find out the foreclosure laws, procedures and timelines for all 50 states.
As mentioned, each state will typically have a different set of rules and a different timeline for foreclosure.
20 states utilize only “Judicial” Foreclosures.
5 states and the District of Columbia utilize only “Non-Judicial” Foreclosures.
25 states utilize both Judicial and Non-Judicial Foreclosures.##
## Of the 25 states utilizing both types of foreclosure, Non-Judicial Foreclosures are more common. In fact, Non-Judicial Foreclosure is the most commonly used form of foreclosure nationally.
I. JUDICIAL vs. NON-JUDICIAL FORECLOSURES:
The primary difference between the two classes of foreclosure is the involvement or non-involvement of the court system. As you might have guessed, Judicial Foreclosures are processed through the courts. Non-Judicial Foreclosures are not.
Regardless of the type used, the timeline for foreclosure is always preceded by a borrower defaulting on their mortgage payments. Most lenders typically won’t threaten homeowners with foreclosure until two or three payments have been missed. However, once the lender concludes that the mortgage is in default and the homeowner is not going to catch up on their overdue payments, a legal filing is made by the lender and the timeline for foreclosure begins.
A. JUDICIAL FORECLOSURES:
In a Judicial Foreclosure, the lender files a formal complaint with the court and records a legal notice of “Lis Pendens”. The complaint must state the details of the debt and why the lender should be allowed to foreclose on the property. The Lis Pendens gives public notice that the house is the subject of foreclosure proceedings and implements the legal timeline for foreclosure.
If the court rules that the debt is legitimate and in default, it will send a notice to the homeowner demanding payment of the amount owed (plus penalties and foreclosure costs). The borrower is typically given 30 days to respond and satisfy the debt. If they do not, the court will tender a judgement in favor of the lender, instructing that the home will be sold at a “Sheriff’s Sale” auction.
After the judgement is entered, in most states that utilize Judicial Foreclosures, the homewner has about 90 days prior to the Sheriff’s Sale to pay the entire amount owed and stop the mortgage foreclosure process. There are other alternatives that could stop the timeline for foreclosure during this 90 day period:
Negotiate a “Forbearance Agreement” with the lender that revises the loan terms to the satisfaction of both parties. (Most lenders do not want to foreclose because it can cost them a lot of money.)
Sell the home.
Refinance the loan.
Declare bankruptcy.
If the mortgage foreclosure process isn’t stopped, the property goes to a “Sheriff’s Sale” where it is auctioned off to the highest bidder and extinguishes all rights of ownership of the defaulting homeowner. If no one purchases the property at the auction, the title to the home reverts to the lender and it becomes what is known as an “REO Property”. This stands for “Real Estate Owned” (by the bank or lender).
How long does the Judicial Foreclosure process take?
This is almost impossible to predict. The judicial timeline for foreclosure is entirely driven by the court schedule and literally “at the mercy of the court”. However, most experts will agree that Judicial Foreclosures can often take more than a year to complete.
Important Note: Even after a home has been sold at the Sheriff’s Sale, some states will allow an opportunity for the homeowner to regain ownership of their home. This is known as a “Redemption Period” and is a period of time after the mortgage foreclosure process has been completed. Even though the property now will have a new owner, the former homeowner can still reclaim title to their home by paying off the full amount of their original home mortgage plus penalties and foreclosure costs.
B. NON-JUDICIAL FORECLOSURES:
Also known as “Power of Sale” Foreclosures, Non-Judicial Foreclosures are conducted outside of the court system by either a third party “Trustee” or an attorney. This mortgage foreclosure process is used when a “power of sale clause” exists in a mortgage or deed of trust. This clause states that the borrower agrees to the sale of their property to pay off the balance of their home loan in the event of a default.
As with Judicial Foreclosures, most lenders will not begin the Non-Judicial Foreclosure process until several payments have been missed and they are convinced that the homeowner is not going to catch up on their overdue payments. However, once the lender determines the borrower to be in default, a legal filing is made by the lender and the timeline for foreclosure will begin. This filing is known as a “Notice of Default” (NOD).
After the NOD is filed, the homeowner typically has a 90 day “Reinstatement Period” to catch up on missed payments and stop the foreclosure before the lender can take further action. There are other alternatives that could stop the timeline for foreclosure during the Reinstatement Period:
Negotiate a “Forbearance Agreement” with the lender that revises the loan terms to the satisfaction of both parties. (Most lenders do not want to foreclose because it can cost them a lot of money.)
Sell the home.
Refinance the loan.
Declare bankruptcy.
If the borrower remains in default at the end of the Reinstatement Period, a “Notice of Trustee’s Sale” will be filed with a date and time posted for an auction sale of the property. After the Notice of Trustee’s Sale is recorded, the homeowner typically has another 21 days before the auction date. During this period, the borrower can still stop the timeline for foreclosure with any one of the alternatives mentioned above in the Reinstatement Period.
If the mortgage foreclosure process isn’t stopped, the property goes