Focus on Foreclosure: What happens, how long does it take and is there any hope once the process has begun?

by Sheila Helmberger

The possibility of losing your home is devastating.

The published notices of foreclosure sales are taking up an increasing amount of space in our local newspapers these days. The process is often heart-wrenching, terrifying and lengthy but if you're faced with a possible foreclosure the good news is you won't be forced immediately out of your home and you may have enough time to work things out with your lender. In about half of the cases homeowners are able to come up with conclusions that will allow them to stay in their homes.

A mortgage company has the right to start a foreclosure after a single default payment. Thankfully that's not usually the case. Most will wait as much as three to six months but the decision varies from lender to lender.

Crow Wing County Recorder Kathy Ludenia said it can also vary from case to case. "If a lender checks your credit, sees the missed payment is a fluke, maybe related to a health problem, they will give you some time. But if your credit is bad, you've lost your job, and all of sudden you're not paying anything, then they might jump on it a little quicker."

Brainerd attorney Jim Nelson acts as legal representative in some of the foreclosures in Crow Wing County. Sometimes he represents a client institution directly but often he also serves as a representative for law firms from the Twin Cities. He said once the foreclosure process has begun the homeowner still has several months before he has to actually vacate the property.

If the loan is from a financial institution Nelson said the lender must first send a certified letter to the borrower notifying him that unless specified delinquencies are cured, the institution will start the foreclosure after 30 days.

"After the 30 day notice period has passed the institution will contact an attorney to start the foreclosure process," said Nelson. It will take about three months from the start of the process to the date of the sheriff's sale of the property. In the meantime the lender will have published the legal notice in the local newspaper six different times."

"The sheriff's sale takes place at the sheriff's office," said Nelson. "There's usually
no one there except the attorney representing the lender. It's really a non-event and takes about a minute," said Nelson. Other people rarely show up for the sheriff's sale and Ludenia and Nelson said 99.9% of the time the bid is won by the lending institution. "Sometimes other people may show up to watch," said Nelson, "simply because they're curious." The sheriff's sale can be postponed if the borrower is communicating with the bank and working on a solution to the problem.

"If you see a foreclosure is in postponement or canceled it's often because lenders are trying to work things out with their customers. Maybe the borrower has asked to make a payment adjustment or pay in installments. It's better to try to work things out. Most lenders would rather not be stuck with a property," said Nelson.

At this point in the process the homeowner still does not need to move out of the property. Even after the sheriff's sale is complete it will be followed by a 'redemption period'. The redemption period is most often six months. Depending on the acreage involved or the percentage of the original debt which has been paid off by the borrower, the redemption period may be 12 months. During this time the homeowner will be able to search for another lender to help them keep the property or use the time to sell it themselves. If the property does sell once the mortgage is paid Nelson said any extra funds can be retained by the seller. That money could be used to make a new start.

If a solution has not been found to keep the property at the end of the redemption period the homeowner will be asked to vacate the property. Hopefully, in that case, the homeowner has used the redemption time to put some savings away for another place to live, paid off debts to improve their credit, or have been able to recover somewhat financially. If they do not leave at the end of the redemption period on their own an eviction process will start. Nelson said paper work will need to be completed and an eviction might result in another week or two before the residents will be forced out. Once it's done they will be legally removed from the property.

The best thing of all to do would be to contact your lender when your payments are first in jeopardy. Losing a home to foreclosure will affect your credit and any home purchases you'll want to make in the future - even after you're back on your feet.