Understanding Foreclosures

Foreclosure 101

A foreclosure is defined as the process of taking possession of a mortgaged property, or a property encumbered by a Deed of Trust, as a result of the mortgagor's or trustor's (borrower's) failure to keep up mortgage or loan payments.

In general, mortgage companies or lenders start foreclosure processes about 3-6 months after the first missed mortgage payment by filing or recording a Notice of Default (NOD) in the county where the subject property is located.

The borrower may reinstate the loan by paying off the default amount during a grace period determined by state law. If the default isn't corrected during this pre-foreclosure period, a Notice of Auction or a Notice of Trustee Sale (NTS) is recorded and an auction, foreclosure or Trustee Sale date is established.

At the auction or trustee sale, the property may be purchased at a public auction for anyone who may qualify to attend. If there are no bidders for the property at the sale, the lender takes ownership of the property. Properties repossessed by the lender are also known as bank-owned, lender-owned or REO properties (Real Estate Owned by the lender).