Posted On: November 2, 2013
Posted by: National Bankruptcy Forum
Last updated May 31, 2017.
If you’re running into trouble making your mortgage payments, you may be wondering: How long does it take for a bank to foreclose on your home? Most lenders will not begin foreclosure proceedings until a borrower is 3-6 months behind on their payments. Although missing a single payment is technically a default under the terms of most loan documents, lenders have neither the time nor the desire to foreclose on borrowers who have missed one payment. In most cases, lenders start with letters and phone calls and don’t actually begin the foreclosure process until the borrower is fairly deep in arrears.
This post deals with the timing of a foreclosure once your lender has started the process and has instituted a foreclosure action against your property.
The Foreclosure Process: Two Types of Jurisdictions
The speed with which a bank can foreclose on a borrower varies based on state law. However, there are basically two different types of jurisdictions for foreclosure purposes: power of sale jurisdictions and judicial foreclosure jurisdictions.
In over half the states, the prevailing method of foreclosure is non-judicial power of sale foreclosure. What does this mean? If you have executed a deed of trust with your mortgage lender, your deed is held by a trustee pending full payment of your note. In the event you fail to make your mortgage payments, the trustee has authority to sell your home at auction.
Power of sale foreclosure can occur much more quickly than judicial foreclosure because the trustee vested with the power of sale does not need court oversight to sell the property. The trustee will give notice of a public foreclosure sale and then sell the distressed property to the highest bidder. A court will usually not oversee the process.
We’ll go over a little bit more about both types below.
When does foreclosure start in a power of sale jurisdiction?
Power of sale foreclosure moves quickly. Upon default, the trustee is permitted to go through with the foreclosure sale after a relatively short notice period (usually two to three months from the date foreclosure proceedings are instituted).
If you live in a power of sale jurisdiction, your mortgage lender can usually complete the foreclosure process in two to three months.
Today, the following states plus the District of Columbia allow foreclosure by power of sale:
- New Hampshire
- North Carolina
- Rhode Island
- South Dakota
- West Virginia
It is important to point out that, while a power of sale mortgage can theoretically be foreclosed on quickly, the incredible back log of foreclosures in many states can delay the process significantly. Lenders simply don’t have the resources to foreclose on all the delinquent borrowers. In some cases, sloppy record-keeping casts real doubt on the lender’s actual legal right to foreclose; in others, lenders don’t want property and are refusing to take it back.
As a result, from start to finish, foreclosure can often take a year or more.
Foreclosure Timeline: Judicial Foreclosure
By contrast, judicial foreclosure is available in every state and is the required method of foreclosure in many states. Judicial foreclosure jurisdictions require a court to oversee the foreclosure process. A foreclosing lender files a complaint just like in a normal civil lawsuit. If the borrower decides to put up a fight and litigate the matter, judicial foreclosure proceedings can take a year or more to be completed.
The requirement that the lender foreclose through the court system slows down the process considerably and the current foreclosure log jam buys borrowers even more time. Like power of sale jurisdictions, all interested parties must receive notice of the foreclosure sale.
How to Stop Foreclosure
While either method of foreclosure can be successfully challenged or delayed by a foreclosure defense attorney, the court oversight of judicial foreclosure allows more procedural leverage to slow down aggressive lenders. It is important for consumers to understand that they have rights in the fight against foreclosure. Power of sale jurisdictions allow for your property to be sold outside of court supervision but you’re still required to receive adequate notice of the sale and sale price. Most power of sale jurisdictions offer borrowers the opportunity to seek an injunction preventing a foreclosure sale if irregularities are found or the lender’s right to foreclose is in question.
Bankruptcy, although a last resort, will stop foreclosure dead in its tracks due to the automatic stay that freezes all creditor collection actions the minute a case is filed. Filing bankruptcy the night before a home is scheduled to be sold at auction can temporarily stop the process. Chapter 13 bankruptcy may allow you to stay in your home while getting caught up on mortgage arrearages that have spiraled out of control.
You have options and there is help available, but remember if you are in a power of sale jurisdiction and have executed a deed of trust with your lender, the foreclosure process can be completed in a matter of months. Be careful, and good luck.