When a homeowner falls behind in their mortgage payments, they can expect lenders to react in specific ways at specific times. There are also two distinct foreclosure processes; judicial and non-judicial. While not all Lenders/Servicers use the same process, the following is a typical timeline from late payment to foreclosure:
Day 1–15: The Mortgage payment is due the first of the month and usually has a 15 day grace period until the 15th of the month.
When the borrower misses a payment:
Day 16–30:
A late charge is assessed, typically 5% of the monthly payment. The company that processes the payments (called the mortgage servicer) begins to attempt to make contact with the borrower to find out why the payment is late and begins collection activities. This is one of the the best times to request assistance, such as a loan modification.
Day 31:
The new month begins and a payment is due for both the previous month and the current month. Any payment received will be applied to the previous month’s payment and late fees.
Day 46–60:
The servicer sends a “demand” or “breach” letter to the borrower explaining that the terms of the mortgage have been violated. The borrower is given 30 days to resolve the delinquency by paying the delinquent amount. The “escalation” clause of the Standard Federal Mortgage is now in effect. The lender/servicer can only accept payment in full of all outstanding mortgage payments, penalties, collection costs, and other legally allowable fees, or forfeit their rights to foreclose on the property.
Day 90: Notice of Default:
Foreclosure proceedings begin with a Notice of Default (NOD). The document is recorded in the county in which the property is located. The recording of the Notice of Default gives “Constructive Notice” to the public.
Day 120:
The latest time that a Complaint for Foreclosure will be filed in the court system. In a Judicial State, the homeowner must answer this civil suit, most often by using an attorney. The defendant then has 28 days to respond or have a default judgment issued by the court against them. (In California, after the recording of the Notice of Default, the borrower and junior lien holders are given proper notification and the borrower has 90 days to bring their account current. This period is referred to as the Reinstatement Period.
Day 180:
Notice of Trustee Sale. If the borrower does not reinstate their account within the 90 day period, the lender will authorize and instruct the Trustee to record the Notice of Trustee Sale (NOS).
Day 201:
After 21 days of the recording of the NOS, a foreclosure sale can take place at public auction. (The property may be sold to a third party bidder or revert back to the lender for a specified amount.)
Trustee Sale (Sherriff Sale):
The property is scheduled for sale in as little as 60 days or as long as 300 days from filing. Bidders are required to pay with certified funds. The opening bid starts at two thirds, or 67%, of the sheriffs appraised value of the property. The auctioneer seeks the highest bid; the successful bidder must tender payment at the sale. In some states, there is a redemption period not longer than 30 days.
