Foreclosure Notices and its Types

Foreclosure does not start immediately, there are a few notices that should be served from lender to borrower and if these notices are not replied then foreclosure process is initiated. There notices that should be served before foreclosure are given here.

Notice of Default:

If the payment is 60 days late, even after the receipt of the missed payment notice borrower does not make any payments, then the bank may proceed by filing a Notice of Default (NOD) after the breech letter expires. Notice of default includes borrower name, property details, amount that you are delinquent, number of days you are behind your payment date and a statement indicating that you are in default under the mortgage contract that you signed at the time of purchase of your home.

Notice may also include that the bank can take further measures, in some states, if the debt isn’t cured immediately. After receipt of NOD, the borrower needs to take immediate action to avoid the foreclosure. Even in a case of ignorance the bank will initiate the foreclosure process.

Dreaded Foreclosure Sale Date Notice (Notice of Trustee Sale (NOTS)):

If the borrower does not respond to the Notice of Default, then bank’s representative eventually sends a foreclosure notice. This notice states that the bank has initiated the foreclosure proceeding and scheduled the sale of your home for auction. It also comprises the amount you currently owe, interest, name of your bank and the contact information about the attorney of the bank.
After the receipt of a dread foreclosure notice, if the borrower fails to satisfy the bank, foreclosure will continue until the home is sold. At any stage of the foreclosure process borrower can talk to the lender or a housing counselor about the available alternatives that may exist and can help avoid foreclosure.

Types of Foreclosure:

Once a borrower falls behind and fails to satisfy the bank then proceeding of the foreclosure starts. There may be two types of foreclosure:

a) Judicial Foreclosure
b) Non-Judicial

Judicial Foreclosure:

In states where the foreclosure proceedings go through a court process those are referred to as Judicial Foreclosure States. Many states allow judicial foreclosures, but only twenty nine states allow power of sale to be obtained without court action. Auctions are often carried out in Court or by the Sheriff’s office and property is sold to the highest bidder.

Non-Judicial Foreclosure:

Power of sale is also known as statutory foreclosure and there is a clause in the mortgage agreement if allowed by your state. After a default on mortgage payments by the borrower, a notice is issued from lender demanding the payment. If a Notice of Default is filed this is normally a sign that the process is going through a Non-judicial foreclosure and these auctions are often more practical though they do have to go through a judicial review to ensure the legality of the process from time to time.