What Does Foreclosing on a House Mean?
Foreclosing on a house means that the lender is seizing the house because the homeowner has violated the terms of the mortgage. If you quit making your mortgage payments, you can expect that your lender will eventually foreclose. Once the lender forecloses on your home, you will be evicted and the house will be be put up for sale.
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Reasons
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The most common reason that a lender will foreclose on a house is that you have failed to make the mortgage payments. But the lender doesn't swoop in to foreclose as soon as you're late with a payment; it only takes action when the loan is seriously delinquent. Other possible reasons for foreclosing on a house include failing to pay the property taxes or maintain insurance coverage on the home, items required by the loan agreement.
Time Frame
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According the Department of Housing and Urban Development (HUD), "foreclosure doesn't happen overnight." It usually takes several months from the time you miss your first mortgage payment, and there are a number of points along the way at which you can halt the foreclosure process. The exact timeline varies by state.
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Process
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Every foreclosure starts with a missed payment deadline. Mortgage payments are typically due on the first of the month, but most lenders offer a grace period of a week or so. After the grace period runs out, the lender charges a late fee. Once your payment is 30 days late, it is considered a "missed" payment. The mortgage is delinquent, and the lender will call or write you to inquire as to the status. These efforts to contact you will intensify if you miss a second straight payment. Once you miss three payments in a row, you'll receive a "demand letter" giving you 30 days to get your payments current, or at least work out an arrangement with your lender. If you haven't done so after the 30 days, the lender initiates a foreclosure. The home can be sold at auction--even if you're still in it--and eventually the sheriff will come to evict you.
Halting the Process
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According to HUD, "lenders do not want your house." What they want is the money you promised to pay them, and many are willing to make arrangements to help borrowers who are going through rough times. You may be able to work out an alternative payment schedule or shift some of the missed payments to the future. You can halt the process, at least temporarily, by making one of the missed payments; however, once you get the demand letter, the lender might not let you off the hook for anything less than the full amount due. This is why it's important not to ignore calls and letters from your lender.
Types
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Foreclosures can be either judicial or nonjudicial, depending on the laws of your state, the wording of your home loan agreement and the nature of the deed ( the legal document that transfers ownership of the house). A judicial foreclosure must go through the court system, and a judge must issue an order giving the lender possession of the house. A nonjudicial foreclosure is one that doesn't require a court order because the loan, the deed or both already give the lender all the authority it needs to take the house. Judicial foreclosure usually takes a little longer.
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