What is a Foreclosure?

What Is A Foreclosure?

A foreclosure occurs when the rights of the homeowner are being terminated that is covered by mortgage. This happens when the homeowner or property owner fails to pay off their mortgage payments. The property then becomes the possession of the lending institution. To date, the numbers of foreclosed properties are growing. In fact, it is estimated that about 4% of the homes in the U.S are facing foreclosures. While there are owners of the homes who are able to get their homes out of this state, there are still around 500,000 homes that have gone through successful foreclosure the past year.

The process of foreclosure starts when the homeowner is unable to make payments that is due on the mortgage on a required time due to many reasons – medical payments, loan terms, unemployment, tired of managing properties, death, and divorce. Whatever the reasons could be, these seriously affect the mortgage payment dues.

Now, foreclosure is being applied to a technique of enforcing payment of debts that are secured by mortgage and this is done through taking the property and then selling it.

The proceedings in foreclosure usually begin with a formal demand for payment and this often comes in a letter that is issued from the lender. This notice letter is called as the NOD or the Notice of Default. The lender will tend to issue the notice when the homeowner is unable to pay off 3 months of mortgage payments – but of course, this will depend on your state. So as an advice, learn more about the foreclosure process in your state.