How Foreclosures Work

Forclosure definition

A foreclosure is a legal process in which a bank or mortgage lender forces a debtor to evacuate property because of the debtor's failure to make payments on an outstanding loan. While it technically takes only one missed payment for a bank to begin foreclosure proceedings, a bank often will allow three or four missed payments before a foreclosure is levied against you. Each state has different laws and regulations concerning foreclosure, but typically a lender must provide ample warning before the foreclosure process begins. Once a foreclosure process begins, public documents must be filed and your foreclosure will become a matter of public record.

Options

If you are facing foreclosure, you have several options to choose from. The first is to conduct a short sale. Because you own your house up until the moment the foreclosure takes place, you will have until that time to sell it. Because there is a short window between the time the notice of foreclosure is given and the actual foreclosure takes place, there is time to sell the house so your credit rating is not adversely affected. Homeowners in this situation often sell their house for a low amount to make it attractive to buyers. You might also be able to declare bankruptcy or refinance the home. Finally, you can call the lender and discuss options. Banks don't want to have foreclosed homes on their books. If you are honest with them, they might be able to help you out and discuss options for keeping your home.

Post-foreclosure

When a foreclosure goes through, several things happen. The bank might decide to sell your house, in which case you might be entitled to proceeds if the bank sells it for more than what you owe. However, you might end up owing the bank if they sell it for less than what you owe. The bank might also put the home up for auction and you will be able to bid on it. If you do lose your home in a foreclosure, you will be evicted from it when the bank takes possession. Usually a bank will give a period of three days for tenants to vacate the premises.

References

• FAQ for Stopping Bank Foreclosures
• Foreclosure FAQs