The Three Stages of Foreclosure?
This is a general summary of the three stages of foreclosure, assuming that the borrower/homeowner fails to satisfy the repayment obligation on their home.
Stage 1 - Pre-foreclosure:
This is the initial stage in which the homeowner falls behind on their mortgage payments. Lenders will send out a Notice of Default which is essentially a public record that your home is in default at least of 60 days. A Notice of Default may or may not be proceeded by a Notice of Intent (to foreclose). After a period of time to be determined by your lender (but at a minimum of 90 days) the lender will send out a Notice of Trustee Sale (NOTS) which sets a sale date at which the home may be sold at a public auction.
Stage 2 - Foreclosure:
At this stage the homeowner may or may not have been evicted from the home (depending on state law). If the home sells at auction, money from the sale is used to pay off the costs of foreclosure, taxes, other prior liens, service charges, advances, interest and principle on the mortgage (basically any charges that the lender can charge in order to add to the amount owed on the home). Any left-over amount is paid by the former homeowner and is called the deficiency balance.
Stage 3 - Post-foreclosure:
When a property that does not sell at auction (either because no one bid on it or the bids were not accepted by the lender) and becomes real estate owned (REO) by the lender (or government agency that guaranteed the loan - HUD, VA, etc). The "bank owned" property is put back on the market for sale and listed through a real estate broker.
