If you don’t fight your foreclosure or take any steps to avoid foreclosure (see our article on foreclosure avoidance options), the foreclosure will move forward on a schedule dictated by your lender’s workloads and policies and the laws of your state. Specific information for your state is in our Summary of State Foreclosure Laws.
The single most important point to understand is that you don’t have to leave your house just because the lender has started foreclosure proceedings. In most states, you’ll probably be able to stay long enough to plan for the future by saving all or some of the money that you’re no longer putting toward the mortgage.
EXAMPLE: Joshua and Ellen got in over their heads and now can’t afford the $3,000 monthly payment on their mortgage. They decide to let the house go. They already know that federal mortgage servicing regulations require the lender to wait 120 days after they quit making payments before officially starting the foreclosure. They then turn to their state’s page in the appendix to see how much more time they have. They learn that:
• They will receive what’s called a notice of default in their state. This notice gives them an additional three months to make things right. If they don’t (and remember, they plan to let the house go), they will have another 20 days’ notice before the house is sold.
• They can file for Chapter 7 bankruptcy and delay the sale by three additional months. Bankruptcy will also let them leave without owing the lender anything. (They otherwise could face a deficiency judgment in their situation.)
• After the foreclosure sale, they’ll probably be able to stay in the house for a month or two.
Altogether, they will have at least a year of living in the house without making payments, and if they can save at least $2,000 a month, they will have roughly $25,000 in the bank when they set out to seek new shelter.
How much time you’ll get to remain in your house and how much money you can save (or, if you have any, equity you can pull out), depend on these factors:
Your state’s page in our Summary of State Foreclosure Laws will give you an estimate of how long you can remain in your home, as well as how much money you'll be able to keep if you file for bankruptcy.