When buying your home, the last thing on your mind will have been the possibility it could end in foreclosure. However, the number of foreclosures in recent years has been increasing and with interest rates rising that trend is likely to continue.
This is why it’s worth understanding the foreclosure process and when it is too late to stop foreclosure.
It is never too late to stop foreclosure, you have until the property is sold at auction. There are many options available to stop the foreclosure process, including paying all outstanding mortgage payments and selling the property, although the best thing to do is speak to your mortgage lender.
In this post, I’ll run through the foreclosure process and the steps you can take to stop foreclosure and proactively avoid it ever happening in the first place.
Understanding the process of foreclosure and legal procedures can help you know whether you’re at risk of foreclosure, what to expect and whether you need legal help.
- 0 to 15 days of missed payments. Typically, mortgage lenders have a grace period where if you pay your mortgage payment up to 15 days late, it won’t count as a missed payment. This will vary by mortgage lenders, however, is to account for admin issues and holidays.
- 15 to 90 days of missed payments. After 15 days the mortgage lender will report your first missed payment to the credit bureaus and issue a late payment fee usually around 3% to 6% of your monthly mortgage payment. This will happen on each subsequent missed payment.
- After 90 days of missed payments. The mortgage lender will usually issue a delinquency notice of default after 90 days which is the next step towards issuing the foreclosure, however, there is still time to pay the outstanding mortgage payments and contact the mortgage lender to stop the process.
- After 120 days of missed payments. After 120 days of no payment made by the borrower, the mortgage lender can issue a foreclosure notice to inform of their intentions to start foreclosure proceedings. The notice will run for a number of weeks, and if no action is taken by the borrower, the mortgage company will be granted a court order to sell the property at a public auction.
There may be slight differences in the law and foreclosure process depending on if you’re in the UK, Texas, California or somewhere else in the world. However, the fundamental principles are still the same and that is a mortgage lender is wanting to recover their investment and will be willing to try and help you in any way they can to avoid risking losing money through selling the property at an auction.
This is why there’s is usually not a point of no return and you can usually come to an agreement right up until the last minute. So this means you should have enough time to rectify the situation and avoid the short sale and costly legal process.
What To Do If Your House Is In Foreclosure?
If your house is in foreclosure, the best option is to speak to your mortgage lender. They may be able to offer options such as remortgaging or payment holidays that can help avoid foreclosure altogether and enable you to return to paying the monthly mortgage payments.
It’s also worth exploring whether you’re entitled to any benefits or have any insurance to help pay the mortgage payments. For example, if you’ve lost your job, you may be entitled to government support or may have income protection insurance in place.
Remember that if your property goes to auction the mortgage lender also has their capital at risk as well as you, so will be willing to provide options to help avoid this situation as it’s also in their interest. How much money the mortgage lender has at risk will depend on how much equity you have in the property and the expected resale value of the property at auction.
Typically properties at auction sell significantly under market value as it is done to provide a quick sale with minimal due diligence from the buyer. This means it’s likely that you’ll lose a significant amount of the equity you’ve built up within your property, possibly all of it, so making sure you do everything within your power to avoid and stop this process is essential.
How To Stop The Foreclosure Process and Auction?
Even if your property has gone to auction, there may still be time to stop the foreclosure auction immediately, however as the mortgage lender by that point will have the legal right to sell your property, you will need to speak to them and come to an agreement.
The good news is there are also other options available to stop the foreclosure process and avoid the sale of the property to the highest bidder.
- Redemption. Borrowers can pay the entire balance due including costs and late fees, effectively repaying the mortgage. There is usually a redemption period on mortgage foreclosures and will usually require getting a second mortgage to get the funding to make the payment.
- Reinstatement. This is where the borrower pays all outstanding mortgage payments including costs and fees up to the last payment. This is often referred to as the delinquent balance and can be the best solution to get everything back on track.
- Bankruptcy. When filing for bankruptcy you can also file something known as an automatic stay, which is an injunction that immediately stops all debt collection activity. However, make sure you understand all of the repercussions of bankruptcy as it can take a long time to recover and cause a lot of financial hardship.
- Legal support. Getting legal advice from a law firm or bankruptcy attorney can help you understand all of your options, especially your foreclosure case if it has got to that stage. You can often get a free consultation to understand whether they can provide the right kind of legal help and support.
- Home buyback solutions. Some financial companies offer solutions where they will offer to buy your home from the mortgage company and you rent the property from them until you’re in a position to buy it back. However, be careful going down this route as there can be complicated deals that can come with a very high-interest rate. Just want to make you aware that this is an option.
Ways To Avoid A Foreclosure
If you are struggling to pay your mortgage payments each month or your income is at risk, making proactive steps can help avoid any negative consequences. This includes avoiding any negative impacts on your credit score through missed payments, accruing late penalty fees and foreclosure.
- Speaking to the lender. The mortgage company may be able to offer you options including payment holidays, reduced payments for a certain period of time or a repayment plan if you’re suffering from a job loss or another issue making it difficult to pay your monthly mortgage payments.
- Selling the property and getting a cheaper one. Getting a cheaper property can save you a lot of money, not only from having a lower mortgage loan but also by reducing other maintenance costs like energy and property taxes.
- Getting insurance and being aware of other benefits. There are insurance products available such as income protection insurance or critical illness insurance that can help protect you in the event of a major issue preventing you from making the house payments.
- Remortgaging the property. This is a loan modification that can make mortgage payments more affordable. For example, if you increase the term and pay back the mortgage over a longer period of time, the monthly payments will decrease. However, just make sure you’re aware that you will end up paying more in interest overall as you’ll be borrowing money over a longer-term.
Summary – When Is It Too Late To Stop Foreclosure?
Overall, there are many different ways to stop the foreclosure process and you can even stop the process right up to when the property is sold at auction. As the mortgage lender also has their capital at risk as well as you, they are usually willing to help you in any way they can.
If you are reading this post proactively to understand more about the foreclosure process but are worried this may happen to you, this post I’ve written about the penalties of paying your mortgage late may be useful.
I hope this post has been useful to help you understand more about the foreclosure process. However, if you do have any questions, make sure you seek legal or financial advice to get help specific to your circumstances.
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
Check out my about page for more info.