Rest assured, where foreclosure is concerned, you and your lender are on the same side. Lenders want your money and the interest that comes with it, not your house. If you seem to be a good risk, the lender will offer to help keep your mortgage afloat. But be forewarned: If you seem like a bad risk, the lender may cut its losses by taking steps to foreclose and evict you as quickly as possible.
The foreclosure spiral begins when your loan payment becomes 16 days overdue. At that point, your mortgage servicer will try to contact you to work out a repayment schedule to bring your loan current.
Mortgage payment due today, the first of the month. Borrower misses it.
Late charge assessed on payment. Mortgage servicer starts attempting to make contact to find out what happened.
Servicer sends “demand” or “breach” letter to the borrower pointing out that terms of the mortgage have been violated.
Servicer refers loan to foreclosure department. Hires local attorney or other firm to initiate foreclosure proceedings.
House sold at foreclosure sale or auction. Wide time range due to different state requirements.
Here are some options your lender may offer you if you miss a payment and want to avoid foreclosure:
Repayment plan: If you suffer a short-term financial setback (expensive car repairs, a medical emergency), your lender may provide some breathing room by agreeing to let you pay off your missed payment in two installments over the next two months.
Loan modification: Mortgage servicers can adjust the terms of your loan — most often by lengthening the amortization schedule, lowering the interest rate or rolling the delinquent amount into the loan and reamortizing the new balance — to help you bring the loan current.
Short sale: The lender allows you to sell the house for less than the outstanding loan amount, takes the proceeds and forgives any remaining debt.
Short refinance: The lender forgives some of your debt and refinances the rest into a new loan.
Refinance with a “hard money” loan: You won’t like the high rates and fees of a hard money loan — one from a private lender — but it may buy you time to sell your home and avoid foreclosure.