What is Foreclosure? (Common Misspellings: forclosure, fourclosure, forcloser, forcloshure)

Foreclosure is a process by which a lender regains a property in which they financed. Usually this is because the person who bought the home isn't making the regular mortgage payments. When you are foreclosed upon you must move out of your house. There is a legal time frame from when you first become late on your payments, until the time they can actually take your home from you. It varies by state, so we suggest a consultation to discuss your specific situation.

Foreclosure will negatively affect your credit for 7 years from last date of activity. Which means if the foreclosure starts Jan 1st and gets completed June 1st, you would have that nagative mark 7 years from June 1st.

In many states the lender may seek a deficiency judgement. This happens when the bank sells the house for less than you owe on it. The difference between the sales price and the mortgage amount would be filed as a deficiency judgment (only if is it negative). For example, say you owned a house worth $100,000 and you lost your job and stopped making payments. Your current mortgage on the house is $95,000. The bank puts the house on the market after foreclosure and only gets $80,000. The difference, which would be filed as a deficiency judgement against you, would be $15,000. You'd have to pay the $15,000.

Stopping Foreclosure

You have serveral options to stop or prevent foreclosure. Some cost money and some are free.

1. Foreclosure Mediation - Probably the most popular and common with people who can't pay all the past due mortgage payments at once. This service negotiates with the lender to move those payments to the back of the loan (pending you have the proven income to make the current payments). It is essentially like getting a grace period.

2. Negotiate a Repayment Structure Yourself - This is definately the cheapest way, but can be frustrating if your lender doesn't have a helpful "loss mitigation department" or a "hardship" program. It can be viewed the same as if you were going to fix your own car. First you have to learn about the car, then fix the car. As with car repair, most people would rather hire a specialist to handle their financial affairs.

3. Deed in leiu of foreclosure - This is where you realize that you can't pay for the house and you voluntarily give the house back to the lender. This still is subject to a deficiency judgement yet counts as a "less serious" foreclosure on your credit.

4. Sell your house - This is a great way if you feel you can get what you owe out of your house. Remember to include the standard 6% realtor fees when calculating your take home. You can negotiate the buyer to pay some of the realtor fees, but it is rare.

For assistance on stopping foreclosure with the mediation services mentioned above, click here.

Monthly Search Statistics for Foreclosure Related Keywords: