Definition of a Foreclosure
When a homeowner is behind on mortgage payments, he has defaulted on his loan. In this situation, a bank, credit union or other mortgage holder can exercise its right to retrieve the property by using foreclosure.
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Function
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According to findlaw.com, "Foreclosure is the legal right of a mortgage holder or other third-party lien holder to gain ownership of the property and/or the right to sell the property and use the proceeds to pay off the mortgage if the mortgage or lien is in default."
Types
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The two main types of foreclosure are by judicial sale and by power of sale. In foreclosure by judicial sale, the mortgage holder sells the property under court supervision. In foreclosure by power of sale, on the other hand, the mortgage holder is not required to sell the property under court supervision.
Time Frame
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"The foreclosure process typically starts after you fall behind on your payments for at least two months, and often three or four," according to findlaw.com.
Prevention and Solutions
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If you are experiencing financial difficulty, contact your lender as soon as possible to find out your payment options. Learn about your mortgage rights by reading your loan documents and by familiarizing yourself with the foreclosure laws in your state. In addition, seek housing counseling from the U.S. Department of Housing and Urban Development.
Warning
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Be aware of foreclosure scams, involving fake counseling agencies and anyone requesting that you sign over your deed.
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