Foreclosure

Foreclosure is a legal procedure that allows a mortgage lender to take ownership of a property when the borrower defaults on their loan payments. The process typically begins after three to six months of missed payments and can take months or even years to complete depending on state laws.

There are two main types of foreclosure: judicial (processed through the court system) and non-judicial (handled outside of court using a power of sale clause). Some states also allow strict foreclosure, where the lender takes title directly without a sale.

Foreclosure has severe consequences for borrowers, including significant credit score damage lasting up to seven years, potential deficiency judgments for the remaining balance, and difficulty obtaining new housing. Options to avoid foreclosure include loan modification, forbearance agreements, short sales, and deed in lieu of foreclosure.