What Does “Foreclosure” Mean In Real Estate?
For all homeowners, the idea of foreclosure is a scary one. No one wants to lose his or her home. Because the term is so frightening, many homeowners do not understand what foreclosure means and its long-term ramifications. Here is a simple explanation of what foreclosure is.
Foreclosure is the legal process by which the right of homeownership is transferred from the person or persons who occupy the home to the bank or lender who hold the mortgage loan.
The foreclosure process will usually begin when homeowners stop making payments on mortgage loans. Lenders will begin the foreclosure process after two or three months of missed payments.
The lender issues a letter, which is usually sent by certified mail. This letter is called a “notice of default.” It states that the property is undergoing foreclosure proceedings and will be on sale to the public soon.
The period of time over which this will occur will be mentioned in the notice of default. This is the time when the homeowner will want to contact the lender and try to work out some sort of repayment plan that is satisfactory to both parties in order to get the late payments caught up and the mortgage loan back into good standing.
If the homeowner receives the notice of default but the owner does not contact the lender, the lender will proceed with further action. The homeowner will receive notice that he or she will have 90 days to bring the outstanding balance current. During those 90 days, if the balance is cleared, the lender will stop all actions of a foreclosure and the property will remain the property of the owner. However, if the owner does not pay the outstanding balance within the designated time period, the property will be auctioned.
Once the auction occurs, the lender will be able to recover the money that was lost when the original homeowner stopped making payments.
Foreclosure is not something anyone wants. The lenders do not want it to happen because they have enough property to unload and really do not want to have to deal with any others. The homeowners do not wish for it to happen because they will lose their homes and damage their credit ratings.
Pay your mortgage on time every month and completely avoid the possibility of foreclosure. Unfortunately, things such as divorce, death of a spouse and even unexpected medical bills arise and need to be dealt with. If you find yourself in any of these situations, it is in your best interest to contact the lender and explain the situation. It is possible that the lender will work with you.
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