The process for an HUD insured foreclosure will differ depending on the state where the homeowner lives. There are general guidelines for a foreclosure process but you should read your states foreclosure laws (see Resources for different state laws).
The Beginning
As a general rule, a lender will start the HUD foreclosure process three to six months from the first missed mortgage payment. After 30 days from the mortgage payment date passes and a payment is not made, the borrower is in default and the foreclosure process can begin. However, you can talk to your lender any time within that three to six month period and you could qualify for the federal Home Affordable Modification Program. If you do not qualify for this modification or do not talk to your lender, then one of the three types of foreclosures will be initiated.
Judicial Foreclosure
This type of foreclosure exists in all states and is the only type of foreclosure in some states. In this process, the mortgage financer files a suit with the state judicial system. A letter will be sent to the borrower demanding payment, and he has 30 days to respond to the payment order. If the payment is not made within a certain period of time, designated by the state, the property is sold at auction to the highest bidder.
Statutory Foreclosure
This foreclosure is allowed in states where the mortgage has a power of sale clause. The lender will send out notices demanding payment after the homeowner has defaulted on payments. There is a state-imposed waiting period, which when passed the mortgage company can carry out a public auction of the property.
Strict Foreclosure
This is only available on HUD homes in some states. The lender files a lawsuit against the homeowner and if the borrower cannot pay the mortgage in a set time period, the property is returned to the mortgage holder. This is common when there is a larger amount of debt than the real value of the property.
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