What Happens During Pre-Foreclosure?

While the individual steps involved in each of the steps in the foreclosure process are different in each state, the general process itself is the same. Pre-foreclosure is generally the first phase of the foreclosure process and is marked by a borrower’s failure to pay and failure to reach any sort of compromise with the lender that satisfies the lender. Remember, banks don’t want to seize homes, but they have to protect their investments (the loan) by identifying when they can be a problem. Failure to make a payment is a problem because it represents a bigger problem, failure to repay the loan, so to resolve it the bank is seizing and selling the collateral.

Steps In Pre-Foreclosure

1. Borrower fails to make a mortgage payment.
2. Bank sends the borrower a late payment notice.
3. Borrower continues to fail to make mortgage payments.
4. Bank attempts to contact the borrower.
5. No arrangement is made and borrower is still delinquent.
6. Bank activates an acceleration clause and demands the mortgage be paid in full.

The last step, when the bank activates the acceleration clause in the mortgage, is the point of no return. If you haven’t talked to the bank before that step, talking to them now will probably not work because they’ve given you ample time to respond. This is why talking to your lender is crucial, they are willing to work with people who are willing to work, but if you don’t respond at all, you’ve shown them that you aren’t willing to work with them (even if it’s because you’re afraid) so they have to take drastic measures.