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Foreclosure can occur when homeowners do not pay their mortgage payments, second mortgage payments, home equity loans or property taxes. Missing a payment is called default. After default, the servicer may send the homeowner a notice of default, usually after the loan is 30 days past due. This is the pre-foreclosure phase of the process. Servicers could start sending threats of foreclosure as early as 60-90 days past due.
If the homeowner does not pay the amount due on the loan, the servicer files a complaint in circuit court. At the same time, an action pending notice is filed telling anyone looking at the deed that a foreclosure is underway on that property. The homeowner is personally served a summons by the sheriff or through a warning order attorney that they have 20 days to respond to the servicer's complaint.
A commissioner’s hearing may be held if the homeowner files an answer to the complaint that presents a legitimate defense or a response to a summary judgment, which is a judgment without a full trial.
If the homeowner does not respond to the summons, the servicer will seek a default judgment. The commissioner will review the motion for default or summary judgment and refer the case back to the judge with a recommendation on whether to sign the judgment. The judge will make the final ruling on whether or not to order the judgment and issue an order of sale.
If the judge signs the order, the case is sent back to the commissioner’s office to prepare the notice of sale and two appraisers are sent to do a drive-by inspection of the property. The notice of sale is posted at or near the property in foreclosure and advertised in the local paper three times in the three weeks prior to the sale.
The commissioner’s sale or foreclosure auction is a public auction held by the commissioner’s office. The opening bid is usually set by the servicer and the highest bidder wins the deed to the property.
Until the property is actually sold to a new owner, the homeowner could still find a work out solution with the servicer. There is no legal requirement that a servicer must work with the homeowner. If a work out solution is found, it is an informal process and does not go through the courts.
When a foreclosure is final, the homeowner must move out of the house. If the servicer sells the property for less than what is owed, they or the U.S. Department of Housing and Urban Development (HUD) could seek a deficiency judgment on the homeowner. This means that the homeowner could still owe the servicer or HUD money
even after the foreclosure
If the property sells at the auction for less than two-thirds of the appraised value, the original homeowner has one year to buy back the property at the price paid by the winning bidder plus 10 percent to retake possession of the house.