As banks make loans and the owners fail to pay, the foreclosure clock begins to tick. Prior to filing for a foreclosure then selling the home at an auction, the lender makes every effort to get the original owners out of financial hot water. It’s not uncommon however for someone to hear that banks make loans and can’t wait to foreclose on the property so they can get the mortgage payments plus the real estate in one big transaction.

But nothing’s further from the truth. Banks don’t want real estate. Tinvesting in foreclosureshey want the interest on the loans they make. That’s why they’re called lenders and not real estate agents.

When a bank has to take back a home, the property is relegated to the bank’s real estate owned, or REO department. Too many foreclosures and soon the bank auditors start calling. Bank closures were rampant up until just a couple of years ago when borrowers could no longer pay and banks essentially lost their liquidity. Foreclosing on a home is the last thing a lender wants. But there is a process that a lender must follow before a foreclosure can occur.

Say a couple buys a home and everything is going smoothly and then one of them loses a job. Their income is cut in half and they can’t make their mortgage payment on the first of the month. So far, no big deal to the bank. The 15th passes and no payment is made and the only thing that happens on the bank’s end is a late payment fee is added to the outstanding mortgage payment.

Then the subsequent payment is missed. Now the lender gets a little nervous. The couple’s phone begins to ring and the bank mails notices alerting the couple that their payments are delinquent. As if they didn’t know. After six weeks has passed with payments still absent, the bank sends an official Notice of Default to the couple. This document, mailed via certified letter, alerts the borrowers that if they don’t bring their loan current a foreclosure filing will occur if they miss the next payment.

Once the third payment in a row is skipped, the lender will then prepare papers to proceed for a foreclosure filing. Bo the notice of default and the foreclosure papers must be sent via certified mail with evidence of receipt by the borrowers and both documents must be filed as a public record. If the bank misses any of these steps, the foreclosure process is invalid and the paperwork must be processed once again.