How Long Does Foreclosure Take?

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A nonjudicial mortgage foreclosure can take about 120 days, or four months, to complete. Judicial foreclosures vary depending on your state. In California, this process can take two to three years.

If you’ve fallen behind on your mortgage payments, the threat of foreclosure can become overwhelming. If you wonder “How long does foreclosure take?” know that you still have options.

Understanding what you can do if your house is in foreclosure can help you mitigate the damage done to your credit and overall financial health. Depending on your situation, you might even discover how to save your home from foreclosure. 

What Is Foreclosure?

Foreclosure means that your mortgage lender can legally repossess your house due to nonpayment. They can then sell your house to help repay the debt you owe on it. And this is true whether you are behind on your first or second mortgage. Home mortgage rates will define when lenders can begin the foreclosure process—this is typically determined by how behind on your payments you are.

Remember that every state has different rules and regulations for foreclosure procedures, and many states offer exceptions that may work in your favor. If you think you may be in danger of foreclosure, work with a legal professional to determine your state’s guidelines.

For example, in some states, you have to miss a certain number of payments before foreclosure processes can begin. Some states may also allow you to reinstate the loan up until a specific deadline.

What Happens When a House Goes Into Foreclosure?

State and federal laws, your mortgage agreement, and the mortgage holder’s personal decisions are major factors. Generally, the foreclosure process starts three to six months after you miss your first mortgage payment, assuming you don’t catch up on payments.

State laws vary, so work with a legal adviser or your lender to determine what will happen in your specific situation. In general, mortgage foreclosure involves the following steps:

1. The mortgage holder gives the defaulting homeowner a written notice of default. This is a formal notice that you have fallen behind on your payments and are in default.
2. The homeowner receives a limited amount of time to correct the default and pay all amounts due. That can include interest, penalties, attorney charges, and any other fees allowed by your state’s laws and your mortgage contract.
3. Once the time allowed for the homeowner to correct the default has passed, the mortgage holder will give notice of a foreclosure sale. This is the actual day of foreclosure.
4. Many states have a redemption period after the foreclosure sale, allowing you to reclaim your home.

Foreclosure actions can wipe out some of the property owner’s debt, such as the original mortgage, home equity loans, and second mortgages. However, you still have to pay any remaining costs associated with your second mortgage.

You might also be responsible for some of the mortgage payments even after losing your home. If the property sells for less than the balance owed on the original loan, a lender could file a deficiency judgment against you in court. 

A deficiency judgment requires that you repay the difference and it lets the mortgage holder collect your assets to compensate for the debt. Not all states allow deficiency judgments in all circumstances. Work with a lawyer or legal adviser to determine your rights and plan of action.

Lenders’ Obligations in a Mortgage Foreclosure

Lenders have different obligations in different states. However, when it comes to mortgage foreclosures, they all typically have at least three common requirements:

1. Notice of default. In most states, lenders are required to provide a homeowner with sufficient notice of default. The lender must also provide notice of the property owner’s right to cure the default before the lender can initiate a foreclosure proceeding.
2. Written proof of money owed under the mortgage. Lenders are usually required to file statements that itemize the amount the property owner owes under the mortgage. 

The amount owed includes the principal, interest, late charges, attorney fees, and any other charges the lender is permitted to charge under the terms of the mortgage or the laws of the state.

3. Service member relief. Lenders are also required to certify in writing that the property owner is not a member of the armed services before initiating a foreclosure action. 

The Servicemembers Civil Relief Act is intended in part to protect deployed active-duty service people. If you are a member of the armed services, consult an attorney about your rights as they concern foreclosure proceedings.

Ways to Stop or Prevent a Foreclosure

The best way to stop a foreclosure is to take action to prevent the lender from beginning the process. When possible, try these proactive ways to save your home from foreclosure:

• Catch up on your default. In many cases, the first notice of default provides you with options for catching up on what you owe. If you can make up your payments and stay current, the lender is much less likely to foreclose.
• Ask for a loan modification. Many lenders will work with you if you need help making your loan payments. Home affordability programs can help you catch up on late payments or potentially reduce the amount you pay if you’re experiencing financial hardship.
• Request a short sale. If you can’t afford your home anymore, you can request a short sale. The lender has to agree to a short sale, but if they do, you can sell the house to a third party for less than you currently owe. 

In some states, the difference is forgiven, while in others, you may be required to pay the difference between the sale price and the remaining loan amount. A short sale will affect your credit, but the effect will be less than that of a foreclosure or bankruptcy.

• File for bankruptcy. Filing a bankruptcy petition that includes your mortgage puts an automatic stay in place. This means that lenders can’t continue any type of collection procedure until the bankruptcy has been resolved or dismissed. 

Whether or not you keep your home depends on what type of bankruptcy you file and whether you can work out mortgage payments in the future. Filing for bankruptcy can have severe consequences for your credit and finances. Consult with an attorney before moving forward with this option.

Defenses Against Foreclosure

If the lender has already filed for foreclosure and none of the options above will work for you, you might be able to legally fight the filing with a technical or substantive defense. Only you and your attorney can determine how to proceed through the process.

One example of a technical defense is when a property owner is not given adequate notice of the default and proceedings. However, technical defenses are often not very helpful in preventing foreclosures because a mortgage holder can easily correct the defense by correcting the procedural defect. 

Substantive defenses use the terms of the mortgage itself to halt a foreclosure. Here are some examples of substantive defenses to the foreclosure process:

• You aren’t in default, and the debt and interest have been paid on time according to the terms of the mortgage.
• The mortgage holder committed fraud in obtaining the mortgage.

If you believe you may have a legal reason to stop the foreclosure, you need to file an objection to the sale with the court. In most states, you can file objections before the foreclosure sale takes place, after the sale takes place, or before the court ratifies the sale if the sale was improperly conducted. 

When a debt is forgiven in a foreclosure action, taxpayers are considered to have made money. That means that the taxpayer or property owner may owe taxes on the difference between the value of the home and what is owed on the mortgage and forgiven in the foreclosure action. You will want to work with your tax professional to help determine your tax responsibility in this situation.

Consider this example to understand how it might work:

• You owe $120,000 on the home. The bank sells your home for $100,000.
• The bank accepts the $100,000 it got in the sale and forgives the rest of the debt via foreclosure, which means it doesn’t seek to collect that money from you.
• The IRS considers that $20,000 as a form of income because it’s money you should have had to pay but didn’t. You might owe taxes on that $20,000.

Help Your Credit With Credit.com

Short sales and other foreclosure proceedings can hurt your credit by a substantial amount. Foreclosure can appear on your credit report for seven years. In many cases, you will be required to wait two to eight years before you can purchase another home.No matter what happens with a foreclosure, it’s a good idea to find out where your credit stands and how you can work to improve it. Credit.com provides a Free Credit Report Card that offers a look at your credit history and a better understanding of how you’re doing with the five factors that impact your score.