Foreclosure laws and processes in the United States vary by state and can be viewed on the RealtyTrac website. Mortgage companies typically start foreclosure proceedings about three to six months after the first missed payment, according to the U.S. Department of Housing and Urban Development.
There are three types of foreclosures. The "Judicial" foreclosure is most common and is available in all states, explains HUD. This occurs when a lender files suit within the judicial system. The borrower then receives a note demanding payment and requiring a response within 30 days. When payment or payment arrangements are not made, the property may be sold by the local court or sheriff, at auction, to the highest bidder.
Many states also permit a "Power of Sale" foreclosure, notes HUD. This occurs when a homeowner fails to make payments and after a letter is sent demanding payment by the lender. The mortgage company, after a designated waiting period, can conduct a public auction of the property. A few states allow "Strict Foreclosure." Once the lender proves the homeowner has defaulted, the court simply gives the property directly to the mortgage company.
States that use mortgages conduct judicial foreclosures, according to RealtyTrac. States that use deeds of trust generally use non-judicial processes, although some states employ both methods. Some states also offer homeowners pre-foreclosure mediation and other methods to resolve the issue.