When you have a mortgage and the lender repossesses the property due to a failure to meet the terms of your mortgage, foreclosure occurs. There are several steps to the foreclosure process. These include default, a sheriff’s sale, and the redemption period.
Borrowers can default on loans by missing even one month’s payment. Lenders will generally send a notice of default before taking legal action to initiate foreclosure. The lender will often attempt to discuss repayment options and begin additional attempts to collect the outstanding debt.
Borrowers unable to resolve their debt could find themselves dealing with a sheriff’s sale. Here, Lenders may have the authority to force a sale of the property. The county sheriff will conduct the sale in a public place. Once a sheriff’s sale has occurred, the mortgage can no longer be cured.
During the redemption period, generally six months, borrowers can remain in their homes and attempt to refinance and obtain a new mortgage. Borrowers can also sell their homes to secure any equity they may have built up during their ownership.
According to 12 C.F.R. § 1024.41, foreclosures cannot officially begin until a borrower is 120 days or more past due on their mortgage payments. However, there are exceptions to this rule. Homeowners have a four-month grace period to get current on their mortgage payments or explore other options to cure their debt.
Once you have gotten behind on your mortgage payment but the foreclosure hasn’t officially begun, you are in the pre-foreclosure stage of the process.
This is one of the most challenging times for borrowers, as lenders have the authority to charge you late fees, inspection costs, and other expenses that put you further in debt.
Under Minnesota foreclosure laws, mortgage lenders are allowed to charge around $15 per home inspection and charge borrowers for other services or fees, including:
There are multiple federal foreclosure laws under 12 C.F.R. § 1024.39 in place designed to protect borrowers, which include:
Lenders have the right to foreclose using judicial and nonjudicial methods when you miss your mortgage payments in Minnesota. Here is how judicial and nonjudicial foreclosures work:
The process for foreclosure generally follows the following steps:
Lenders may be required to send borrowers pre-foreclosure notices within 30 days of a notice of default. Under Minnesota law, lenders may also be required to provide borrowers with foreclosure prevention counseling and repayment options.
The lender will begin the foreclosure process when they file their notice of pendency. This is the notice of a sale being published in your local newspaper a minimum of six weeks before the sale of your home.
The lender will send you a copy of your right to redeem the property and your rights after selling your home. This is the stage in which lenders should provide borrowers with information regarding how they can avoid foreclosure.
Once these notices have been issued, if your property is considered a homestead and other requirements are met, you can postpone the sale of your property for up to 11 months.
When your home is being sold, lenders will usually start by making credit bids, allowing them to make a bid up to the total amount you owe on the house, including all other costs and fees they may charge you.
If the lender is the high bidder at your sale, they could obtain a deficiency judgment against you. However, if a third party is the higher bidder and offers more than you owe on your home, the excess proceeds are your right.
There are multiple ways you may be able to stop your home from being foreclosed on. Some of the more viable options include:
You might be shocked that scams involving mortgage default and foreclosure are far more common than you thought. Foreclosure scams can take several forms, but two of the more common include:
Answering some of your most pressing foreclosure questions.
The amount of time you’ll have to move out of your home after foreclosure can vary widely based on the circumstances of your case. If you refuse to leave your home after the foreclosure sale, the home’s new owner may bring an eviction lawsuit against you.
Mortgage companies have many restrictions, including:
Before a foreclosure sale, mortgage companies have specific obligations, including:
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