What Happens When A Property Goes Into Foreclosure?

Want to learn about the foreclosure process? Our article explains it all.

authorOlga Ronis
Aug 10, 2023

What Is Foreclosure?

Foreclosure is a legal process where a lender – usually a bank – repossesses a property after the borrower defaults on the loan. The lender then sells the property, usually in an auction, to recoup its initial investment.

Foreclosures happen when a homeowner fails to keep up with their mortgage payments. According to official figures, in 2022, more than 320,000 properties showed foreclosure activity, representing 0.23% of all housing units in the US. That is, 0.23% of properties fell behind on mortgage payments, received a default or foreclosure notice, scheduled auctions, or were repossessed by lenders.

Since it was launched in 2021, the Homeowner Assistance Fund (HAF) has assisted more than 230,000 homeowners during the pandemic. However, it’s expected that foreclosure rates will continue to rise in the near future as the HAF funds are allocated.

This can be a golden opportunity for home buyers to find a new home.

For that reason, familiarizing yourself with the foreclosure process and the timelines can be key to planning your future.

Foreclosure Timeline

First of all, foreclosures don’t happen overnight. Under federal law, lenders can’t start a foreclosure procedure until the borrower is at least 120 days behind on their mortgage payments.

But what exactly constitutes starting a foreclosure procedure?

In judicial states, starting a foreclosure procedure implies filing a suit, complaint, or petition – also known as a first notice – requesting a foreclosure.

In non-judicial states, it’s considered a first notice, any document establishing a foreclosure sale date. Lenders can’t file any of these before the 120-day mark.

Broadly speaking, this is how the foreclosure process goes:

First Missed Payment – Payment Default

You missed a mortgage payment. After you miss your first payment, the lender will likely contact you. Some lenders offer a two-week grace period before issuing a late payment fee, but it’ll depend on your contract. The lender may also report your late payment to credit bureaus like Experian, Equifax, and TransUnion.

Second Missed Payment

You missed your second consecutive mortgage payment. At this point, the loan service provider will assign a worker to your case. They will try to get in contact with you to restructure the terms of the loan or find an alternative solution. If you’re going through financial hardships, we strongly recommend being honest with your lender.

Keep in mind that most lenders are open to restructuring the loan terms at this point. Foreclosures can be a lengthy and expensive process for all parties involved.

If you can’t find common ground with your lender, you will incur a second late fee, and they may report the second late payment to the credit bureaus.

If you don’t feel like you’re being treated fairly, you can reach out to the US Department of Housing and Urban Development (HUD) for an approved housing counselor – at no cost.

Third Missed Payment – Notice To Accelerate

The foreclosure process hasn’t begun at this stage, but it’s just around the corner.

Your lender will send you a formal letter, also known as Notice to Accelerate, informing you of the total amount owed and notifying you that you have 30 days to pay your mortgage balance – including any accumulated interest and late fees –in full or risk foreclosure.

Suppose you haven’t contacted a HUD-approved housing counselor. In that case, we recommend that you do so immediately – applying for loss mitigation and restructuring the loan terms is still on the table. Foreclosure proceedings will begin when the 30-day period ends.

Fourth Missed Payment – Foreclosure

If you fail to pay the full amount owed by the fourth month, you are more than 120 days behind on your mortgage payment and no longer protected under federal law – unless you filed for loss mitigation and it’s still pending. Foreclosure proceedings will now move forward.

From this point onwards, your lender will likely refer the loan to an attorney or trustee, and you will incur all attorney fees.

In judicial states, your lender will file a foreclosure lawsuit. This first notice will likely come in certified mail; if you fail to respond, the judge will grant the lender a default judgment. If you respond, the case could go to trial.

In non-judicial states, your lender will issue a Notice of Default (NOD). This document details how much you owe – including late fees and foreclosure costs – and gives no more than 90 days to repay.

Foreclosure – Notice Of Sale

After all the forms have been filed to the courts, the foreclosure process is well underway. At this point, the attorney or trustee representing the lender will issue a Notice of Sale.

The Notice of Sale is used to schedule a sale date – at this point, the lender will start advertising in local newspapers or listings for potential buyers. In most cases, you still have time to prevent foreclosure – you have until the date of the sale or auction to pay the total amount owed, including the attorney fees incurred.

This process can drag on in judicial states for months – or even years –as each step requires court approval. This process is considerably quicker in non-judicial states as they’re settled out of court – it usually takes 2-3 months.


After the auction is finalized and the property has a new owner – or the bank repossesses it if there are no buyers –the original borrowers receive an order to evacuate if they’re still living in the foreclosed property.

If necessary, the local sheriff or law department may get involved to facilitate the eviction.

How Long Is The Foreclosure Process In My State?

In the US, most foreclosures are governed by state laws rather than federal laws. We recommend checking out the United States Foreclosure Law in your state.

Generally, all states are divided into mortgage states and Deed of Trust states. Foreclosures in mortgage states must go through the court system, so foreclosures take longer – sometimes years.

Foreclosures in Deed of Trust states are settled out of court and don’t have to go through the court system. In these states, foreclosures can be settled within months.

How Can I Stop The Foreclosure Process?

The easiest way to avoid foreclosure is to make your mortgage payments on time. Of course, this isn’t always an option. In the first quarter of 2023, almost 100,000 foreclosure notices were filed in the US.

Before the foreclosure process starts, there are a few things you can do:

  • Contact a HUD-approved housing counselor
  • Restructure the term of the loan with your lender
  • Apply for loss mitigation 
  • Request a mortgage forbearance

Your first step should always be contacting a government-approved housing counselor.

If you’ve tried everything and foreclosure is unavoidable, there’s one last resource to minimize the impact on your credit score: a Deed In Lieu of Foreclosure.

A Deed In Lieu of Foreclosure transfers property ownership to the lender – without going through foreclosure –in exchange for relief from mortgage debt.

The main benefit of a Deed In Lieu of Foreclosure is that it stays on your credit report for only 4 years – compared to foreclosures, which stay for up to 7 years. You will also save up on attorney fees and other costly foreclosure proceedings.

As always, we recommend getting qualified legal advice from a local real estate attorney.


What State Has The Longest Foreclosure Process?

The states with the longest foreclosure processes are Hawaii, New Jersey, Kansas, Louisiana, and New York. These states support judicial foreclosures, and the average foreclosure takes more than five years.

How Long Can You Go Without Paying Your Mortgage?

In general, the foreclosure process doesn’t start until you receive a Notice of Default at the start of your fourth month of missed mortgage payments. Depending on the state, you can go up to 120 days without paying a mortgage before foreclosure begins.

How Does A Foreclosure Affect You?

A foreclosure can have a long-lasting effect on your credit history. Foreclosures result from falling behind on mortgage payments, and since both late payments and foreclosures impact your score, the effect compounds.

In the most extreme cases, your credit could drop 100-160 points, and it can take anywhere from 3-7 years to fully recover.

Can You Get A Foreclosure Off Your Credit Report?

If the foreclosure was reported accurately, you can’t remove it from your credit report. Instead, it’s cleared automatically no later than seven years from the Day of First Delinquency (i.e., the date of your first missed mortgage payment).

If the foreclosure wasn’t reported accurately, you can dispute it to remove it from your credit report. As always, we recommend getting qualified legal advice from local real estate attorneys.

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