The Three Stages of Foreclosure

Foreclosure doesn’t happen in a lightning strike. Like any legal process, it has slow, meticulous steps. If you’re worried about suffering the consequences of a foreclosure, understanding how it goes might help you cope better with the situation.

During the Pre-foreclosure stage

At this time, both lender and borrower can do what they can to avoid denting the borrower’s credit history. This is usually the time before the Notice of Default is passed on to court.

The borrower and the lender can negotiate the terms, and the lender can either forgive a portion of the borrower’s debt, or give the borrower a longer term to pay off his obligations.

In the middle of the foreclosure stage

Once the Notice of Default has been passed, the property is legally transferable to the lender’s ownership once s/he decided to take a legal action against the borrower.

During this stage, the borrower can either write a deed-in-lieu of foreclosure so that the mortgage can be forgiven in exchange for the pledged property.

The borrower can also negotiate with the lender so the borrower can sell his/her property him/herself, acquire profits and enough cash to pay for the debt, and walk away without a scratch.

Post-foreclosure

Once the foreclosure claims of the lender have been proven valid in court, the property will be auctioned off. If the property attracts bidders, the deal is closed. If it doesn’t attract bidders, the property remains in the ownership of the lender. S/he can then choose to dispose of it through ordinary real estate means.