What is Foreclosure?

Being behind in your mortgage payments or other bills can be a very stressful and trying time, no matter what reason the financial stress occurred. You could have gotten behind in your financial obligations to an illness in the family, an automobile accident that put the breadwinner in the hospital for a long period of time, a lay off from work, or even a death in the family. These things happen to everyone and can cause you to be under so much financial burden that you are in jeopardy of losing your home.

You have probably heard the term foreclosure but you may not know exactly what the term means and more importantly how to stop it. First, a foreclosure happens when you are unable to keep your promise to pay your mortgage payments on time to the bank or lending company that has the lien on your home.

This is usually the company that gave you the loan in order for you to purchase the home. They hold the lien on your home until you pay off the loan, then you receive the deed to the property. A foreclosure is a legal way that the lending company can take possession of your home and sell it to try to get back some or all of the money that you owe on the property. This is normally referred to as a default on a promissory note. When your home is foreclosed on, you must move out! Then more than likely the home will be sold at a public auction.

If you are in the United States, there are two different types of forecloses in most states. “Strict foreclosure” is when the lending company claims the title of your home and the possession of the property back to them for the payment of what you owe; this is normally on the contract. This also means that you will not owe anything to the lending company.

The lending will then auction the property in what is called a public auction. Either, the county Sheriff or some other officer of the court normally performs these public auctions. The winning bidder will not pay more than the amount that is owed by you on the property. This means that they can only ask for the amount that you actually owe at the time of the foreclosure. They cannot make a large profit on the property.

The other type of foreclosure is the one in which the lending company will give the homeowner a legal notice of the default and their intent on selling the property. The homeowner will then have time to do something in order to stop the foreclosure such as file bankruptcy. If the homeowner does nothing to stop the foreclosure, the property is auctioned off to the highest bidder at a public auction.