What is foreclosure and how does it happen?
You may have heard the term “foreclosure,” or you might even know someone who has been through it. In either case, the process can be overwhelming, especially if you don’t understand how it works and what causes it. In this blog post, we will walk you through the process and offer options to help prevent it from happening to you.
What is foreclosure?
Foreclosure is a legal process that occurs when a homeowner can’t make their mortgage payments, and the lender (typically a bank) takes possession of the property. This allows the lender to sell the home and use the proceeds to pay off the remaining mortgage balance.
What causes a foreclosure?
Foreclosure can happen due to financial hardships, such as loss of income, high medical bills, adjustable-rate mortgages, divorce or separation, or negative equity.
The foreclosure process in Tennessee goes as follows:
Day 1: Borrower misses monthly mortgage payment.
Day 16-30: Mortgage servicer applies late charges and starts attempting to make contact with the borrower.
Day 45-60: Servicer inspects the property for occupancy and solicits loss mitigation options to help cure the default.
Day 90-105: Servicer sends a “demand” or “breach” letter to the borrower to share violation of mortgage terms.
Day 120-150: Servicer refers loan to foreclosure department. Hires attorney to initiate foreclosure proceedings.
Day 150-415: House sold at foreclosure sale or auction. Borrowers in Tennessee, a non-judicial state, have as little as two months to make arrangements and vacate the property.
Day 150-415+: After the sale, officers force borrowers out immediately following the auction by eviction.
According to THDA, foreclosure can happen in Tennessee either by judicial action or by newspaper advertisement (Sheriff Sale). The most common foreclosure action in Tennessee is by advertisement. In this procedure, the lender’s attorney advertises the property for sale in a newspaper for three weeks. Following that, the property will be sold to the highest bidder.
How can I prevent a foreclosure?
To avoid foreclosure, contact your lender and let them know about your financial situation. In most cases, lenders will offer to explore other solutions like readjusting your payment plan or exploring loan forbearance. Another option is to speak with a HUD-certified housing counselor to discuss your options.
UHI’s education programs include financial coaching and a Housing Stability Program that offers foreclosure and rental counseling services. Here, you’ll learn how to work with your servicer to determine repayment options, avoid scams and more. If you’re ready to get started, apply for our program today.