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Foreclosure | What does Foreclosure mean?
What is foreclosure?
What is foreclosure? What does foreclosure mean? These are some of the most commonly asked questions by home owners. Foreclosure essentially means the process of recovering the possession of a property that was on mortgage and this will mainly be due to the mortgagor's failure in keeping up with the payments due. Therefore, foreclosure refers to the process of a banking institution repossessing a home in which the owner has been found to be unable to cover his mortgage loan payments. Such a home will essentially not be up for sale until the process is completed. In the event that the bank has listed the home in the Multiple Listing Service, then the home can be put up for sale.
What does foreclosure mean?
The process of foreclosure undergoes three main stages and they include:
- Pre-foreclosure: at this stage the bank files a notice for default in payment and this is generally when the owner of the home falls behind two months in the payment process. The owner will generally be afforded a period of between two and three months to attempt refinancing the loan on the one hand or selling the property on short sale on the other hand.
- Auctioning stage: the bank then proceeds to set up an auction in a bid to sell the home and recover its costs.
- Bank owning: in the event that the home was not successfully sold at the auction, the lien holders of the home have two options. The first option is that they can be paid off by means of private mortgage insurance and the other option is that they can take a loss on the investment.
If successful, foreclosure can result to a number of consequences based on the agreements that were specified in the loan agreement that led to the purchase of that home. The most profound consequence is that the individual loses the home after eviction and this will also include any equity that may have been invested in the home. This will be accompanied by the stress and uncertainty that is brought about by the failure to know when to leave the home. Eviction will also damage the credit worthiness of the person and this will in turn make it difficult for them to acquire new housing, apply for credits and also future employment opportunities.
What do I do?
It is therefore imperative that a person knows their rights and the options that they have in relation to what is foreclosure. There are two major categories in the attempt to define the question what does foreclosure mean. The judicial type is that where the process is carried out under the supervision of the court, while the non-judicial type is that where the court is not involved. However, it is worth noting that in both cases, the owner will be served legally with the notice of foreclosure. Further to this, the legal notice will in a majority of the cases be published in a local print paper with wide circulation and auctioned off publicly.
While the process and the timelines for the process of foreclosure vary from one state to another, the filing process is normally initiated at least thirty days after the default in the payment.
How to avoid foreclosure
It is advisable to all home owners with a mortgage to consult the opinion of legal experts on what is foreclosure. It is also worth noting that the individual may be able to leave the home in the absence of the full foreclosure process and thus avoid having the burned of a credit history. The owner should have their financial information at the ready and be in a position to explain their current financial position in a bid to negotiate the refinancing terms where this is an option.