How Does the Foreclosure Process Work?

Unfortunately, foreclosures are a regular occurrence, and many Arizona homeowners face the possible foreclosure of their homes. This article will walk you through the foreclosure process and offer some options or steps you can take to avoid foreclosure.

What Is Foreclosure?

Foreclosure is the legal process of a lender who attempts to recover the amount owed on a defaulted loan by taking ownership of the mortgaged property with the intent to sell it. When a borrower fails to meet the terms they agreed to in their mortgage document by missing monthly payments, a lender is entitled to take back the home. 

What Is the Foreclosure Process?

The foreclosure process can start legally once you are 120 days past due on your mortgage payments (although there are some exceptions). Once you are 120 days late on payments, a lender can file a lawsuit asking the court to allow a foreclosure sale. You will receive a written letter and will be asked to respond. However, if you do not respond by the allotted time, the lender will automatically win the case.

You can choose to defend the foreclosure lawsuit, and the court will review your case to evaluate the evidence and determine who wins the case. If your lender wins the case, they will enter a judgment against you and order your home to be auctioned. 

Once the sale hits the public auction, the lender might make a credit bid. This means the lender can bid up to the amount owed on the home, or they may bid a lesser amount. In Arizona, if the lender is the high bidder but bids less than the total debt, they can get a deficiency judgment against the borrower. However, if a third party is the highest bidder and offers more than your amount owed, the sale results in excess proceeds, and you are entitled to that money.

How Can You Avoid Foreclosure in Arizona?

While a foreclosure can be a scary prospect, there are some options and ways to avoid foreclosure on your home.

Don’t Avoid the Problem

The further behind you become, the harder it is to avoid foreclosure. Stay on top of your mortgage payment information, and don't ignore the problem. 

Contact Your Lender

Stay in contact with your lender, open any mail, and answer all phone calls. Sometimes your lender will work with you or have program options to help you get caught up on your mortgage. 

Know Your Mortgage Rights

Find your loan documents and read them thoroughly to know what your lender has legal rights to do if you can't make your payments. The laws and timelines for foreclosure vary by state, so contact your local State Government Housing Office.

Work on Your Finances

You could sell jewelry, an extra car, or use a life insurance policy to get caught back up. This is also an excellent time to check on your spending habits. Are there any cuts you can make to your budget to catch up on payments?

Find a Mortgage Takeover Program

A mortgage program can help you avoid foreclosure. At The Trusted Home Buyer, we can buy your house "subject to" the existing mortgage and take it over. This program will allow us to make on-time payments or get your mortgage paid up-to-date. However, the note will remain in your name. This program can rebuild your credit, help you avoid foreclosure, and give you a higher price and more equity from your home.