When you miss a payment on your home loan for several months, your lender can initiate foreclosure. A foreclosure is the process by which your lender initiates the sale of the property under the loan to repay the amount owed them. The foreclosure process can take several months to a couple of years, and in between that period, it is possible for the delinquent homeowner to take action to prevent foreclosure.
There are two types of foreclosure, and the type being applied varies per state. Some states such as New Jersey follows judicial foreclosure, which means that the lender has to file a lawsuit in court to initiate and conclude the foreclosure process. Meanwhile, nonjudicial foreclosure is followed in some other states where there is a set procedure to be followed by both parties but outside the court system.
Missing one loan payment doesn’t automatically mean your property will enter foreclosure. Your lender will most likely impose a late payment fee in this case. If you miss two loan payments, the lender will send a demand letter, as well as making several phone calls, reminding you of the default and to demand payment. While you may be inclined to ignore the letter or avoid the phone calls, this is actually a good opportunity for you to discuss with the lender your options in order to stop foreclosure before it starts. Most lenders would likely offer restructuring of the loan or come up with a payment plan for you to catch up on your missed payments.
If you and your lender can’t come up with an agreement, and you keep on missing payments, the lender initiates the foreclosure process by sending you a Notice of Intent to Foreclose. In New Jersey, after at least thirty days of your receipt of the notice, the lender can file the foreclosure complaint and summons. If you respond to the notice, you will have 45 days to make your loan up to date or reinstate the loan. To reinstate the loan, you will have to pay relevant fees and other costs on top of the monthly payments that you have missed.
Otherwise, the lender will finalize the process with a foreclosure sale. A notice of sale will be mailed to you at least ten days before the foreclosure sale, aside from the notice being posted on the property as well as in the sheriff’s office. At the foreclosure sale, the property will either be sold to the highest third-party bidder or will revert to the lender.
Redemption after sale
For ten days after the sale, and until the court confirms the sale, you can file an objection to the sale. If the lender also obtains a deficiency judgment, you can file for redemption of the property, wherein you have a period of six months after the deficiency judgment. If you file to dispute the deficiency, you forego your right to redeem.