What is Mortgage Foreclosure?

When most people purchase real property, they do not have enough money to simply purchase the property outright. In order to make the purchase, they are required to borrow money from a lender. In exchange for lending the money, the lender will hold a lien against the property. If the borrower does not make the required payments, then the loan goes into default and the lender can exercise the lien against the property, in order to take legal possession of the property for the purpose of selling the property to pay off the borrower's loan. This process is called mortgage foreclosure.

How Does Mortgage Foreclosure Work?

The first step in the mortgage foreclosure process is that the loan becomes delinquent because the borrower has not made a required payment or payments. When the loan becomes delinquent, the borrower goes into what is called default. Often, the loan will remain in default status for ninety days while the lender contacts the borrower to inform him or her of the situation and give the borrower an opportunity to pay the overdue balance.

Once a mortgage is in default, the lender may then begin the foreclosure process by filing a Notice of Foreclosure. This means that the lender will file documents in court or with the county recorder, depending on the state, stating an intention to foreclose on the mortgage.  There are a number of steps before this process can be completed, and the typical time period that elapses from the filing of foreclosure until sale of the property by the sheriff is anywhere from 120 days to 9 months. The borrower can also extend this process even longer by challenging the proceedings in court. This method will not usually prevent the sale of the property, but it can extend the amount of time the borrower can remain in the property.

It is important to be aware that once the lender has filed for foreclosure, the borrower will receive a great deal of mail offering to refinance the property or provide other assistance. The reason the borrower receives this mail is that the Court filing is a public record, and anyone can access the information. It is best to be very skeptical about these offers and claims, as many of them are fraudulent. It is best to ignore these offers and work with your lender or another reputable financial institution to resolve the situation.

Download your free copy of the Foreclosure Prevention Workbook, available in English and Spanish.