What Is Mortgage Foreclosure
Sadly some people end up having their homes foreclosed upon simply because they were too embarrassed to contact their lender, or didn’t know what foreclosure is and what options are available to them to avoid foreclosure.
Let’s start by getting clear on what foreclosure is:
- Foreclosure is a legal process whereby your lender (the financial institution that lent you the money to buy the home) repossesses, or takes over, your home. If your home is worth less than the amount you owe on your mortgage loan, your lender can pursue something called a “deficiency judgment” whereby you will owe your lender the difference.
- Foreclosure laws vary by state. In half of all states foreclosures are court proceedings where a lender files a suit against the borrower. Unless the homeowner can successfully contest the foreclosure, the lender will win the judgment and the home will be sold through court supervision to recoup the loan amount. In states that have “non-judicial foreclosures,” creditors foreclose simply by advertising the home for sale in a legal notice in the newspaper. If the homeowner wants to stop this type of foreclosure they have to file a lawsuit to stop the sale. Some states allow both.
- In every state lenders are required to give homeowners some type of notice of foreclosure. In some states lenders are required to give the homeowner/borrower a “Notice of Intent to Foreclose.” This Notice gives the homeowner a defined amount of time to become current on the mortgage (meaning pay off the delinquent payments). Once a lender declares that your loan is in default the loan can be accelerated, which means that the entire balance of the loan becomes due within a prescribed amount of time – typically 30 days. If you, the borrower, are not able to make the delinquent payments and/or repay the loan within 30 days then the lender initiates foreclosure by having their lawyer file a lawsuit.
- The foreclosure process varies in time, but it typically takes between 3-10 months for a bank to finalize a foreclosure once it has been initiated.