What Does Pre-Foreclosure Mean?

How long is the pre-foreclosure process, and how does it work? The answer depends on state law and other factors.

By , Attorney · University of Denver Sturm College of Law

The period after you fall behind in payments, but before a foreclosure officially starts, is often called the "pre-foreclosure" stage. Sometimes, people refer to the period before a foreclosure sale actually happens as "pre-foreclosure," too. (For the purposes of this article, the pre-foreclosure period starts when the borrower falls behind in payments and ends with the foreclosure sale.)

While entering pre-foreclosure is serious, you still might be able to save your home or give it up without losing it to a foreclosure sale. A few options you could have are:

  • getting current on the loan
  • applying for a loan modification or
  • selling the property.

If you're looking to buy a home that's in pre-foreclosure, you have options as well. You could offer enough money to pay off the borrower's debt or potentially pay less in a short sale.

How Does Pre-Foreclosure Work?

Pre-foreclosure begins when the mortgage borrower becomes delinquent in payments. Then, the loan servicer, on behalf of the lender, contacts the borrower to discuss getting current on the loan or working out a way to avoid foreclosure, like with a repayment plan. During the delinquency, the servicer can charge the borrower various fees, like late charges and inspection fees.

Then, in most cases, the lender sends the delinquent borrower a notice, perhaps a breach letter around the 90th day of the delinquency, or possibly a specific pre-foreclosure notice that state law requires. The borrower has a limited amount of time to pay the overdue amounts or work out another way to prevent a foreclosure from starting.

Usually, a foreclosure officially begins when the borrower is more than 120 days delinquent on the loan. Once the servicer completes all the steps that state law requires in the foreclosure process, the home is sold at auction. At this point, the property is considered foreclosed, subject to any redemption period.

How Long Is the Pre-Foreclosure Process?

In some places, the pre-foreclosure process prior to the sale could be as short as a few months. Or it might take more than a year or two before a foreclosure sale happens.

Exactly how long it takes before a home is finally foreclosed depends on state foreclosure laws and whether the foreclosure is judicial or nonjudicial. Generally, judicial foreclosures take longer.

No matter how long the process takes, you'll likely have plenty of time to apply for—and hopefully get—an alternative to foreclosure. But you should take action as soon as you know you'll have trouble making your payments or shortly after you fall behind in them.

Can You Stop Pre-Foreclosure On Your Home?

Yes, you can stop pre-foreclosure on your home. You can apply for loss mitigation either during the time before the foreclosure officially starts or during the pre-foreclosure stage before the sale.

In most circumstances, federal mortgage servicing laws require the servicer to hold off on moving for a foreclosure judgment or order of sale, or conducting a foreclosure sale, if the servicer gets your complete loss mitigation application more than 37 days before a foreclosure sale. (If you submit a complete application before foreclosure starts, the servicer can't begin the foreclosure before evaluating your application.)

Under federal law, the servicer can't go ahead with the foreclosure until:

  • informing you that you don't qualify for any loss mitigation option (and you've exhausted the appeal process)
  • you decide to decline the servicer's loss mitigation offer, or
  • you breach the terms of a loss mitigation offer, like by failing to make the payments during the trial period of a loan modification.

After applying for loss mitigation, you might qualify for a loan modification to make the payments more affordable. If you're ready to move on, you can avoid a foreclosure by selling the home for enough to pay off the loan or completing a short sale (with the lender's permission).

Or you might be able to give the property to the lender in a deed in lieu of foreclosure. Completing any of these or another loss mitigation option will stop the pre-foreclosure process.

Also, during the pre-foreclosure period, most people get a limited amount of time—either under state law or the mortgage contract's terms—to reinstate the loan (pay the overdue payments plus fees and costs). Reinstating the loan stops the foreclosure process, and you resume making your regular monthly mortgage payments.

What Is the Difference Between Pre-Foreclosure and Foreclosure?

"Pre-foreclosure" in this article means the time between the mortgage default and the foreclosure sale. However, again, some people call the time period before a foreclosure begins the "pre-foreclosure" period. Either way, the borrower has opportunities to pay the overdue amounts or work out a loss mitigation option during pre-foreclosure.

After the foreclosure auction, in most cases, the borrower can get the house back only by redeeming it (if state law provides a redemption period after the sale).

How Can I Avoid Pre-Foreclosure?

If you think you won't be able to pay your mortgage on time, contact your loan servicer immediately. You could be eligible for a repayment plan, forbearance, loan modification, or another option.

You might also be able to qualify for assistance from the Homeowner Assistance Fund program in your state. The states and the District of Columbia have established specific programs to distribute financial assistance from the federal Homeowner Assistance Fund to help homeowners who are having money troubles.

While the programs differ from state to state in terms of what kind of help is provided and how much money homeowners can get, eligible homeowners can generally qualify for money to pay:

  • delinquent mortgage payments, including principal and interest
  • mortgage reinstatement after a forbearance
  • other home-related costs related to a period of delinquency or default, such as homeowners' insurance, property taxes, flood insurance, and mortgage insurance
  • utilities, like electric, gas, sewer, and water, and
  • past-due homeowners' association or condominium owners' association fees or liens, special assessments, or common charges.

Most state programs are scheduled to last until the earlier of September 30, 2026, or when program funds run out. Many states expect to run out of money before this date.

What to Do If Your Home Goes Into Pre-Foreclosure

If your home goes into pre-foreclosure, contact your loan servicer if you haven't already. You probably have options at this point to avoid a foreclosure sale.

Again, you might consider a reinstatement or qualify for a forbearance, loan modification, short sale, or deed in lieu of foreclosure. Different options are available, depending on what kind of mortgage you have. For example, you might qualify for a Flex Modification if you have a Fannie or Freddie loan. Lenders also offer their own in-house modification options called "proprietary" modifications.

Also, you might be able to participate in foreclosure mediation if your state offers this kind of program.

Are There Any Advantages to Pre-Foreclosure?

Pre-foreclosure has a lot more downsides than upsides. If a home reaches the pre-foreclosure stage, it usually means the homeowner is in imminent danger of losing the property. So, there aren't very many advantages to being in pre-foreclosure.

Pros and Cons of Pre-Foreclosure

Once you stop making mortgage payments, your credit scores take a hit. You're also at serious risk of losing the property to a new owner through a foreclosure sale. Really, the only advantage to being in pre-foreclosure is that you might have more loss mitigation options once you're delinquent on the loan.

However, with some alternatives to foreclosure, like certain types of loan modifications, you only need to show your loan servicer that default is imminent. If you think you might fall behind in payments, contact your mortgage servicer to find out what options are available to you.

Does Pre-Foreclosure Affect Credit Scores?

Being in pre-foreclosure does affect your credit scores. To what extent your score will fall depends on various factors, like how far behind on payments you are, whether you file for bankruptcy, and whether the foreclosure is completed.

The servicer reports overdue mortgage payments to the three major credit reporting agencies (Equifax, Experian, and TransUnion) as 30 days late, 60 days late, 90 days late, etc. The agencies then add this information to your credit reports.

Your credit scores will probably fall about 50-100 points when you're 30 days overdue. Each additional missed payment makes your credit scores to drop further. A completed foreclosure or bankruptcy will also damage your credit scores.

Exactly how badly these events hurt your credit depends on whether your credit scores were previously high or low. If you had high credit scores before filing for bankruptcy or falling behind and going through foreclosure, for example, you'd lose more points than if your scores were already low.

What Does Pre-Foreclosure Listing Mean?

A "pre-foreclosure listing" is when the homeowner (mortgage borrower) puts the house up for sale, even though it's in the pre-foreclosure stage. Generally, the goal of a pre-foreclosure listing is to sell the house for enough to pay off the mortgage. Though sometimes, a pre-foreclosure listing is for a short sale.

By selling the property during the pre-foreclosure period, a foreclosure can be avoided.

Can You Buy a House That Is In Pre-Foreclosure?

You can purchase a home that's in pre-foreclosure. The selling homeowner will either list at a price sufficient to pay off the outstanding mortgage loan or an amount short of the full debt amount. A sale that's short of what's needed to pay off the mortgage loan is called a "short sale."

The homeowner must disclose that the sale is subject to foreclosure because the sale listing doesn't stop the foreclosure process. If the sale is a short sale, the listing will say so.

Can You Buy a Pre-Foreclosure Home With a Loan?

If you want to buy a pre-foreclosure property, consider working with an experienced real estate agent who can submit your offer to the homeowners. (If the home is in pre-foreclosure, the listing homeowners still own the property because the foreclosure sale hasn't happened yet. So, your real estate agent will need to present the offer to the current homeowner.)

The process for buying a pre-foreclosure home is similar to buying any home listed on the market. You'll want to include a mortgage pre-approval letter before making the offer. The seller and lender (in the case of a short sale) will want to be sure you can afford the amount you're offering.

You would negotiate just as you would any other home-sale transaction. But with a short sale, the lender will also be involved. Keep in mind that you'll have a limited amount of time to complete the sale, depending on state foreclosure laws. Foreclosures take longer in some states and circumstances than in others.

How to Find Pre-Foreclosure Homes

Information about homes in pre-foreclosure is publicly available, even if the homeowner hasn't listed the property for sale. Pre-foreclosure listings might also include properties for which a foreclosure auction is scheduled.

To find pre-foreclosure homes listed for sale, check the multiple listing service (MLS). Real estate professionals use the MLS, a network of databases, to list homes that are on the market. You must have a real estate license to access the MLS, so it's best to work with an experienced real estate agent.

You can also look at websites like Zillow.com and Realtor.com. These websites aren't MLS databases, but they usually get their data from various MLS databases and make it publicly available.

Talk to a Foreclosure Lawyer About Pre-Foreclosure

To get specific information about your state's pre-foreclosure procedures and how they apply to your particular situation, consider talking to a local foreclosure attorney.

If you're facing a foreclosure, be sure to look into your options, and don't wait to ask for help if you need it. In addition to contacting your loan servicer, talk to a HUD-approved housing counselor, who will help you for free, as soon as possible to explore different foreclosure avoidance options.

If you have questions about buying a pre-foreclosure property or need help with the process, consider working with an experienced real estate agent or talking to a qualified real estate attorney.

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