When a homeowner takes out a mortgage, they’re agreeing to pay back not only the amount of the loan (the “principal”), but also any interest that accrues over time.
How do foreclosures happen?
When a homeowner takes out a mortgage, they’re agreeing to pay back not only the amount of the loan (the “principal”), but also any interest that accrues over time. If they miss multiple mortgage payments, it shows the bank that they may not be able to keep up with their end of the bargain. That’s when a foreclosure — the process of the bank repossessing the house — will begin.
The first step: the bank will issue a Notice of Default (NOD). The default notice is the beginning of the “reinstatement period,” during which the homeowner must pay their bills or face foreclosure.
When does a house go up for auction?
Typically, if the owner doesn’t catch up on their loan payments (or go the route of a short sale) within roughly 3 months. This can be different in different areas. The eviction process of being served the NOD, they’ll receive a Notice of Sale (NOS). The NOS means that the house is officially in foreclosure and an auction date has been set.
A house doesn’t sell at auction — what now?
If the foreclosed home doesn’t sell at auction, the mortgage company becomes the owner, making it a “bank-owned” or “real estate-owned” property.