Foreclosure can be a homeowner’s worst nightmare. Not only are they facing a lot of problems in their lives, they are also losing the one thing that kept them safe and secure – their home. Laws regarding mortgage default and foreclosure differ from state to state and mortgage lenders and servicing companies vary in the way they approach delinquent borrowers . Consequently, there are dozens of different scenarios that can play out as a mortgage delinquency progresses, and at least that many ways a borrower can deal with his or her default problems. 
In order to be a strong investor in foreclosure properties, its necessary to understand the foreclosure process. Know and understand the homeowners rights, the lenders rights, and your rights as you proceed down the path, and you’ll become much more successful in foreclosure investments.
A mortgage starts on the path towards foreclosure if the payment isn’t made on time. If the borrower doesn’t make a payment within 15 days of the due date, the lender will begin assessing fees in the form of a mortgage late fee. This fee is usually a percentage of the principal balance, and will be added to the balance due. These fees will continue to be assessed month after month if the balance is not brought up to date.
When an initial payment is late and continues past the 30th day, some lenders will allow a borrower to make a partial payment of the past due amount; others will insist that everything be brought current. In these economic times, some lenders may be flexible and work with the homeowner to develop a payment plan; the only way to know is to ask.
Once a borrower misses two payments, the lender will begin calling and trying to reach the borrower via a collector. Most states have rules regarding collection activities and telephone calls including their frequency, content (no threats are permitted), and timing (early morning and late night calls are generally off limits). In any case, the calls are structured to work with the borrowers to get them back on track if at all possible.
About 60 to 90 days after the initial missed payment the lender will send a notice of default, usually by Certified Mail, giving the borrower a finite period in which to cure the situation. The only way to proceed from this point forward is by paying all past due amounts, and any collection costs added to the late fees. Once that remedial period passes, the collection department will refer the loan to the lender’s legal department which will, after another period of time, send the documents to a local attorney to begin foreclosure proceedings. At this point legal fees will begin accruing rapidly.
As with any legal event, there are benchmarks that must be met throughout the foreclosure process. Once the case is turned over to attorneys, the impending foreclosure must be advertised, usually in both the local papers and in the largest and closest metropolitan daily. If the homeowner is a member of the military, there are additional safeguards required by federal and state laws.
As an investor, it is possible to jump in at any time. From short sales allowing you to take over before the foreclosure process begins, to working with the lender either during or after the foreclosure auction, it is possible to pick up some great bargains – if you know what to look for.
