Foreclosure
The legal process by which a lender takes possession of and sells a property after a borrower defaults on the mortgage.
Foreclosure begins when a borrower misses enough payments, generally 90 to 120 days delinquent, that the lender invokes its right to recover the collateral. The exact process varies by state, with judicial foreclosure (going through the courts) and non-judicial foreclosure (using a power-of-sale clause in the loan documents) being the two main models.
A completed foreclosure stays on credit reports for seven years and makes future mortgage qualification difficult, most loan programs require a multi-year waiting period before a foreclosed borrower can buy again.
Before things get to foreclosure, borrowers usually have meaningful options: forbearance, loan modification, short sale, or deed in lieu. The earlier the borrower contacts the servicer about hardship, the more options remain on the table.
Related terms
Other terms you'll see alongside Foreclosure
A temporary pause or reduction of mortgage payments granted by the servicer when a borrower faces hardship.
A permanent change to the terms of an existing mortgage to help a borrower facing long-term hardship stay in the home.
Failure to meet the legal obligations of a loan, most commonly by missing scheduled payments.
The company that collects monthly payments, manages the escrow account, and handles borrower service on a loan after closing.
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