what is foreclosure of loan

Foreclosure is a legal process that a lender uses to recover the amount owed on a defaulted loan by taking ownership of the mortgaged property and selling it. It happens when a borrower fails to make mortgage payments, and the lender can use the property as collateral to recover the remaining debt amount. The foreclosure process varies by state, but in general, lenders try to work with borrowers to get them caught up on payments and avoid foreclosure. The foreclosure process begins when a borrower defaults or misses at least one mortgage payment, and the lender sends a missed-payment notice indicating that months payment hasnt been received. There are two types of foreclosures: judicial foreclosure and non-judicial foreclosure. In a judicial foreclosure, the lender files a lawsuit with the judicial system, assuming the mortgage note does not have a power of sale clause. The borrower then has a period of time to respond and pay, and if they do not, the home can be foreclosed upon and sold. In a non-judicial foreclosure, if the property that was sold was where someone lived most of the time (their primary residence), then the lender can only collect the money from the sale of the home to cover what theyre owed. A foreclosure is considered a very negative event on a borrowers credit report and will remain on it for seven years after the date of the first missed mortgage payment.