Pre-foreclosure and Foreclosure Resources
Pre-foreclosure and foreclosures most often occur due to a failure to pay the mortgage for consecutive months, usually 3-4, depending on the terms of the mortgage.
Pre-foreclosure is the earliest stage of foreclosure and is also known as the most important stage in the foreclosure process because it is the easiest stage at which to halt the progression of a foreclosure.
What does Pre-foreclosure mean?
Preforeclosure is when a home is in the beginning stages of being repossessed. In order to get to this stage, a mortgage is most often at least 120 days late. Preforeclosure means that the lender has filed a claim or a notice of default with the court.
This process explained here is for the NJ Foreclosure process, not all states will be the same with regards to the timeline, but the general progress towards repossession will be similar.
How long is the foreclosure process? What is involved?
First, a lender must provide a Letter of Intent to Foreclose 30 days prior to filing the notice of default with the court. Learn how to see if you can do a quick sale and get out of this situation right here and stop the process.
The lender must explain certain specifics within this letter of intent, which you can find summarized nicely here. In general, this information should specify the situation, how much money is owed and some contact info.
If the mortgage is not brought up to date within this 30-day period, then the lender will file a lawsuit with the court. Then the homeowner is given 30 days to rectify the mortgage debt and prevent the process from progressing, which is why the pre-foreclosure stage is so key. Property debt can be offloaded by selling a house and therefore avoiding further damage to credit scores.
After the lender has filed a claim with the court, the lenders are responsible for serving the homeowner with a summons to court. A homeowner will have 35 days from the time of delivery of the summons to provide an answer to the court. From there two scenarios arise:
Contest the Foreclosure Lawsuit: In this scenario, the homeowner will be assigned to a court within his or her local municipality and the proceedings will occur over the next few weeks to months.
No Answer/No Contest: If the homeowner does not answer within 35 days, then this will be his or her property, which is why, again, preforeclosure is such a key step in the process. After filing for Entry of Default (basically, this means that the homeowner hasn’t effectively answered the lawsuit within the 35 day period and the lender is asking the court to proceed) the lender will send the homeowner one last chance to settle the debt, which sometimes can be accomplished via a quick sale. The final chance to sell will be tendered to the homeowner 14 days prior to the lender filing for Entry of Final Judgement.
If the final chance to settle the debt can be resolved: The homeowner must respond via certified mail within 10 days. This is where many homeowners may reach out to us and ask how to stop foreclosure at the last minute? The easiest answer is to see if they qualify for a quick sale.
If the final chance to settle the debt cannot be resolved: The court will order a writ of execution, which will lead to a sheriff sale and a public auction.
What happens with an FHA Foreclosure?
The process is similar as the process above except that the lender will be paid via the US Department of Housing and Development (HUD). Mortgage insurance on FHA loans will be utilized to pay the lender. HUD will then sell the home.