The pre-foreclosure stage is a critical phase in the foreclosure process, and understanding it is crucial for homeowners facing financial difficulties. This period typically begins when a homeowner falls behind on their mortgage payments but has not yet reached the point of foreclosure. Here’s an overview of the pre-foreclosure stage:

Mortgage Delinquency:

The pre-foreclosure stage commences when a homeowner becomes delinquent on their mortgage payments (or otherwise defaults under the terms of a Note and Mortgage). Lenders usually provide a grace period, but when payments continue to be missed, the mortgage goes into default.

Default: The Note that evidences the debt and Mortgage that secures the property describe events that are considered a “default” and the legal remedies if a default occurs.  Generally, the primary “default” that contributes to mortgage foreclosure actions is missed payments.  

Notice of Default:

Following a period of missed payments (usually 30-60 days) or failure to cure a default other than non-payment, the lender may issue a Notice of Default (NOD) to the homeowner. This formal notice serves as a warning that the loan is in default, and it often includes the amount owed and a timeframe within which the homeowner must take action to rectify the situation, or the loan will be accelerated and foreclosed.

Acceleration: An acceleration clause is a common feature in loans secured by real property that gives the lender the right to “accelerate” the amount due under the Note and immediately demand the entire balance due, not just the missed mortgage payments. 

Opportunity for Resolution:

During the pre-foreclosure stage, homeowners still have an opportunity to resolve a delinquency and prevent foreclosure. They can explore various options, such as reinstating the loan, paying off the loan, negotiating with the lender for a loan modification, refinancing, or pursuing a repayment plan. Seeking legal counsel during this phase can be highly beneficial, as it enables homeowners to navigate the complexities of mortgage negotiations and explore potential alternatives.

After acceleration, compliance with federal conditions precedent (as applicable), and the passage of 120 days of payment default, a lender or servicer may initiate a foreclosure proceeding by filing a complaint in the county in which the property is located. 

At MPC LAW, we understand the challenges homeowners face during the pre-foreclosure stage. Our goal is to provide guidance and assistance to clients during this critical time, helping them explore viable solutions to avoid foreclosure, protect their homes, and work towards financial stability. By addressing the issues in the pre-foreclosure stage, homeowners may be able to find a more favorable outcome and regain control of their financial well-being.