Foreclosure Action

A foreclosure action is the legal proceeding sometimes initiated by a mortgage lender after a borrower defaults on their mortgage. When a borrower fails to make mortgage payments or otherwise fails to fulfill any of the obligations set forth in the mortgage agreement, the lender can enforce its rights through a foreclosure. Foreclosure is the process by which a mortgage lender repossesses a property after default. A foreclosure auction is the process by which the mortgagee auctions off the property after a foreclosure.

A foreclosure action typically occurs when a borrower has defaulted on a loan after a certain amount of time, as specified in the mortgage documents. Very specific and detailed statutory procedural requirements apply to foreclosures and must be complied with to avoid any invalidation of a foreclosure sale. Proper notice of the foreclosure sale must be given to the debtor and to the general public, but exact procedures can vary state by state. 

Mortgage lenders will first initiate a foreclosure after a borrower has missed anywhere between 3 to 6 months of payments, depending on the lender and the state in which the property is located. The lender will first submit a public notice with the County Recorder’s Office, indicating the borrower has defaulted on the mortgage. In some states, the notice is called a Notice of Default, while other states call it a a lis pendens, which is latin for suit pending. 

This causes a borrower to enter a grace period known in most states as pre-foreclosure, during which the borrower can either come up with the money to stay current on their loan, or arrange a sale of the home. If the borrower can’t come up with the funds, or come up with some other arrangement with the lender, the foreclosure process continues.

At this point, the mortgagee or its trustee will set a date for the home to be sold at a foreclosure auction. The lender will record a Notice of Trustee’s Sale at the County Recorder’s Office, and it will notify the borrower while advertising the sale on the property itself, and in the local media. The lender will stage an auction either at the county courthouse, the office of the trustee or on the property itself. In many states, the borrower has the right of redemption in which the borrower can become current on the loan up to the moment the property is auctioned.