When a bank will start a foreclosure depends largely on the laws of the state in which the property is located. Foreclosure timelines vary widely from state to state, for all parts of the process from filing and mailing of lender notices to homeowner redemption periods to scheduling and notification for foreclosure auctions. Completion of the foreclosure process can take less than two months (Texas) to more than a year (New York) from start to finish.
Grace Period
Most mortgage lenders allow for a grace period of 15 days past the due date for your monthly house payment. The lender will not add a late charge if it receives your payment before the grace period ends. For example, your house payment is due on the first of each month, and your lender allows a grace period of 15 days. Your payment coupon or monthly mortgage bill should indicate that you will be charged a late fee if payment is posted on the 16th of the month or later.
Late Fee Assessed
If your payment has not been received by the end of the grace period, a late fee will be added to your amount due. Typically, somewhere between day 16 and 30, you will receive a phone call from the mortgage servicing company that processes your payments for the bank. A representative of the servicing company will contact you to find out why you have failed to make your payment. At this point, there may be some concern, but the bank will not start a foreclosure yet.
Demand Letter
If you fail to make your payment after the grace period, you are in default on your loan and have entered the pre-foreclosure phase. Typically, the bank does not start formal foreclosure proceedings yet. Around day 45 to 60, the lender will send you a demand or breach letter, indicating how you have breached the terms of your mortgage contract. Each state has its own rules regarding the foreclosure timeline, but usually you will have 30 days at this point to bring your loan current, including all accrued late fees.
Initiating Foreclosure
If you fail to respond to the demand letter, generally around day 90 to 105, the bank will start a foreclosure. The bank will direct the mortgage servicing company to file a Notice of Default with the local county recorder's office and mail you a copy. If you do not respond by contacting your lender to make payment arrangements within 30 days, the lender files a Notice of Intent to Foreclose, and formal foreclosure proceedings are initiated.
Auction and Redemption Period
A foreclosure auction may be scheduled by day 150 to 415, depending on the state. A Notice of Trustee's Sale or Notice of Sale is filed, posted on the property, mailed to you and published in the local adjudicated (legal) newspaper. You may or may not have a redemption period, in which you are given a certain amount of time (a few days to a year) to buy back your property from the winning auction bidder. A lawyer knowledgeable in your state's foreclosure laws can advise you of the terms of your state's redemption period, if there is one.
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