When a homeowner is not able to pay off their mortgage on time, their property can be sold by the bank or private creditor to pay off the unpaid debt. This is called a foreclosure. This means that foreclosures happen when a borrower falls behind their mortgage payments.
In almost every state, foreclosures are always judicial, which means that they are settled in court. But there are states that allow non-judicial foreclosures as well.
What happens during a judicial foreclosure?
When you, as a homeowner, falls behind the repayment of your mortgage, your lender may file a lawsuit against you. They have to file it in the county where the property is located. They will request for the court to allow them to sell the property to pay off unpaid debt.
The servicer or the company where you make your payments to can only file a lawsuit if you fall behind in repayments for more than 120 days or at least 4 months. This is according to the Consumer Financial Protection Bureau that took effect on January 10, 2014.
Before the servicer can go to court, they will send you a breach letter to inform you that you are in default on the mortgage. The letter will also be a demand that you pay off the debt within a specified period. Failure to do so would result in the foreclosing party filing a lawsuit in court.
In the event that you refuse to respond to the lawsuit, it is most likely that the foreclosing company will receive a default judgment that authorizes them to sell your house.