It used to be a fairly standard protocol. If you fell behind on your mortgage, after 60 – 90 days, the mortgage company would start the foreclosure process, and begin eviction proceedings. You could be out of your home in less than 6 months.

With the unprecedented number of foreclosures happening at the moment, mortgage companies are having a hard time keeping up with all the people who aren’t paying. It is now a common scenario that people are staying in their homes well past one year. Let’s see how.

Foreclosure Process
If no payments have been made in for 60-90 days, the bank will notify you of pending foreclosure in the mail or delivered in person, sometimes by pasting a notice on the front of the home. Once the notice has been served, the mortgage company will typically wait for an answer from you, usually about 30-60 days. If no answer is received, the mortgage company will file a motion with the court to auction the property or repossess it through foreclosure.

Repossession or Auction?
The bank will try and determine the value of the property and decide if it is cheaper to take a loss on the principal amount or take possession through foreclosure. If the home is repossessed, the bank not only faces the cost of listing it with a realtor, but the expenses of getting the home in shape to sell and maintaining it while the house is on the market.

No matter which way the bank decides to go, it must apply for a court order to foreclose or put it up for auction, which takes 30-45 days. The auction notice has to be displayed for another 2 weeks or a minimum of 21 days in public places. Only after that the auction is conducted.

If your home goes up for auction, the chances of it actually selling vary depending where you are in the country. Take Phoenix, AZ, where there are many people “underwater” in their homes and a large number of homes flooding the market. In this climate, most likely the home will not sell during the auction for the amount of the mortgage owed. The bank then has to decide if it will allow the owner to try and sell the house in a short sale or proceed with repossession.

Short Sale
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. A short sale is typically faster and less expensive than a repossession. It’s a win for the seller, because the bank releases him from any liability of the forgiven part of the loan.

If the home is listed for sale with a realtor, any offer on the property must be approved by the bank. Because they are so backlogged, approvals on buyer offers can take up to 3 months.

Cash or Financing?
If the buyer is applying for financing, this can hold up the deal for an additional 30 days.

Final Count
Let’s count the time we have so far (worst case scenario). The numbers we have below also assume that the bank is acting promptly on non-payers and is not backlogged:

• 60-90 days for the banks to decide to issue a notice
• 1-2 weeks for the notice to be delivered by mail or in person
• 30-60 days waiting for the homeowner to respond to notice
• 30-45 days for the courts to issure a ruling allowing an auction of the property
• 3 weeks for a public notice of the auction

If home doesn’t sell at auction:

• 1 week to get the paperwork together to list the home with a realtor for short sale
• Depending on the market – 3-6 months to find a buyer
• 1-3 months for the banks to approve the buyer’s offer
• 30 days for the loan to close if buyer is not paying cash.

While we are not advocating that you stay in your home without making payments, it does seem like it can take a minimum of 8 months before the property changes ownership and you are evicted. The 8 months does not include the delays at the lender due to the unprecedented backlog of defaulted loans.

If delays are present due to auctions or short sale activities, the time period can stretch to one or even two years.

Have you gone through the short sale process or a foreclosure? How long did you stay in your home? Tell us about it by leaving a comment!

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