What is a Foreclosure?
Before all the panic sets in, it is important to know the basics about foreclosures. To foreclose is the legal process by which a homeowner defaults on his/her mortgage. Usually, when you have missed payments for two months, you have defaulted on your loan, but you are still not in foreclosure. Foreclosure involves a forced sale of the property usually at a public auction, with the proceeds of the sale applied to the mortgage debt. The foreclosure proceedings don’t begin until the mortgage lender or bank submits paperwork to a state/prosecuting attorney.
For homeowners, if you are not able to make your mortgage payments, don’t ignore the letters and notices you are receiving from your bank that demand payment because they won’t go away. If finding another loan or refinancing are not an option for you, you need to contact your bank or lender immediately to discuss what options you do have available – i.e. selling the house. Many people are hesitant to do this which is understandable but ignoring it will only exacerbate the situation. Remember, it is usually in the interest of the lender/bank to keep the borrower in their homes and work out a payment plan.
However, recently there have been several cases when homeowners have been unable to contact their banks. If this happens, you should immediately contact a housing counseling agency such as NeighborWorks America and check with your state and local governments. Many housing counseling agencies operate in partnership with the Federal Government and provide services free of charge since they are partially funded by the U.S. Department of Housing and Urban Development (HUD) and NeighborWorks America. To get a complete list of resources in your state go to the HUD resource page.