The exact process for how foreclosure works varies by state law; however, there are some processes that are the same or similar across all states. In most cases, the foreclosure process begins with a borrower falling four months behind on mortgage payments.
Once the borrower has fallen behind in payments, the lender begins the process of filing the foreclosure documents.
There are three main ways that a foreclosure happens. The most common is Judicial Sale. This requires the lender to file documents with the courts in the county where the borrower resides. The home is then sold at a foreclosure auction. If the home is sold for less than the loan balance, the borrower may be liable for the remaining balance.
With a Power of Sale, the lender handles the entire foreclosure process and can place the home for sale using a real estate agent.
The final option, a strict foreclosure decree, involves the lender bringing a lawsuit against the borrower. A strict foreclosure is only available in a few states.
Regardless of the type of foreclosure, the lender is often required to list a notice of foreclosure in a local publication, such as a newspaper. All parties must be notified.