The Foreclosure Process And What Happens

With the ongoing economic downturn, more and more homes and properties face foreclosure over the past year or two than ever before. Besides the poor economy overall, the biggest factor is the sub-prime lending spree of the past few years that created ballooning payments and allowed people to enter into mortgages that they couldn’t manage and shouldn’t have been given.

When a home is foreclosed on, it means that the bank or lender has obtained a court order terminating the loan agreement and can take possession of the property back from the signer. This would be the bank that underwrote the original loan or mortgage agreement.

When a mortgage or home loan or mortgage is underwritten, the lender or bank will get a security interest from the borrower. In effect, they are pledging the property or home as security collateral for the loan. If they fail to meet the payment terms, the lender or mortgage holder can try to foreclose, or repossess the property.

While the main reason for foreclosure is failure to pay the mortgage note or loan, it isn’t the only reason. Property tax that hasn’t been paid, overdue HOA dues or assessments, even unpaid contractor bills are all problems than can lead to a foreclosure action.

The foreclosure process as it relates to a residential mortgage loan happens when the bank or other secured creditor takes possession of the property after the owner has failed to comply with the mortgage agreement. Most commonly, this is happens as a failure to meet payment of the home loan.

After foreclosure, the creditor will likely try to sell the property and keep the proceeds in order to pay off its mortgage plus legal costs. This is what foreclosing on the mortgage or loan actually is. Though there are some possibilities for the homeowner to reclaim their property at that point, it’s clearly much more desirable to avoid going into foreclosure to begin with.