The process of foreclosure is set by state and federal law, and it differs depending on the state the property is located in and the type of loan. There are three steps common to every foreclosure.
1. First, notice is given to the borrower that the loan is in default and that the lender intends to begin foreclosure proceedings. This notice can be given as soon as the first payment is missed or may not be sent until after several payments are missed. However, the foreclosure process does not begin until after the notice of default is given to the buyer, regardless of how few or how many payments have been missed.
2. Second, there is a period of time during which the borrower can bring the payments current, or in some other way satisfy the lender. Satisfying the lender can be accomplished by arranging a change in the requirements of the loan, refinancing and paying off the foreclosing lender, or selling the property and paying off the foreclosing lender. This time period will also vary depending on the location of the property and type of loan.
3. Third is the sale of the property at a public auction to satisfy the debt. Some states allow a period after the sale for the borrower to redeem (buy back) the property. This can be as short as three days or as long as one year. Most buyers do not redeem.