What is Foreclosure?

Foreclosure occurs when real property is sold to satisfy an unpaid debt. The debt is often a home mortgage, but foreclosure can happen because of other liens, too. Tax liens, mechanics’ liens, and other debts can lead to foreclosure of the home.

In order for there to be a foreclosure, there must first be a default. Generally, this default is a failure to make current payments on the mortgage, but it could also be selling the property without permission or failing to pay current taxes, for example. The note and mortgage will set out what constitutes a default and list the lenders’ remedies.

If required under the terms of the mortgage or deed of trust, the lender will send the borrower a notice of default that permits the homeowner to become current by paying all amounts due.  If the homeowner does not “cure” the default, the servicer or the foreclosing attorney usually sends an “acceleration” letter. This letter tells the homeowner that the entire balance in addition to any past due amounts are now due.

All states permit the borrower a period of time after default in which to “redeem” the property. This requires paying off the loan in full, plus any accrued costs--past due interest, lawyers’ fees, or monies advanced by the lender to cover escrow shortfalls, are some common examples. Typically, redemption can only be accomplished either through refinancing the property or by selling the property. Usually borrowers have the right to redeem the property up until the sale date, but state law governs when the final redemption date occurs.

For information and assistance regarding foreclosure, see:

www.foreclosurehelpandhope.org 
or call
888-995-HOPE