The FHA Foreclosure Process

The FHA foreclosure process begins within 60 days of your falling behind on your mortgage (also known as delinquency). It works as follows:

1. The lender files form 2068 Notice of Default with the lender. This form describes reasons for the delinquency.


2. An FHA loan counselor works with the lender to make changes to the loan to try to avoid foreclosure. This counselor will try to work out an agreement allowing you to make the back payments any way you can. At the same time, he/she will get the lender to agree to forbearance. In other words, the lender will agree not to begin foreclosure proceedings even though it has the legal right to.


3. You now have 1 year to resolve your problem. If in 1 year the problem has been resolved, then the lender lets FHA know. If not, then the lender must file a default status report and must begin the foreclosure proceedings.


4. Once the foreclosure proceedings begin, the process is the same as for any other foreclosure proceeding. The only change is that because the FHA insured the loan it could end up with the house.


5. To avoid ending up with the house, the FHA might allow a short sale of the property. A short sale is a term used to describe when a home is sold for less than what is owed on it.

What you can learn from this is that if you work with your lender, you may be able to stay in your home for up to a year or more. This may give you enough time to work through whatever problem you're having.


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