The term Foreclosure describes the process of a lender who tries to recover monies owed on a loan in default by a borrower. The lender will try to sell the home via a short sale or take the home back as a REO (Real Estate Owned) property and put it up for sale. When a homeowner defaults on a loan, a lender may not move forward on the foreclosure process until the loan is ninety days delinquent to allow time for the homeowner to cure the default. Once a foreclosure process has been initiated by the lender, the process can be terminated in one of four actions:
-The homeowner can work with the lender to reinstate their loan by paying an agreed amount to cure the loan. Sometimes, a lender will allow to take the payments they are behind and throw it back into the principal and readjust their monthly payments or a payment plan for the outstanding would be devised so the homeowner can make partial payments until paid off.
-The homeowner sells the property and takes the proceeds to pay off all loans thus avoiding the pains of a foreclosure and from further damage to their credit history.
-The home is sold at a public auction
-The lender takes the property back and sells it themselves. This is usually done when the owner signs the deed to the lender via (Deed In Lieu of Foreclosure), a short sale transaction, or buying the property back at the public auction. To further clarify, a property that is facing foreclosure is usually referred to as a pre-foreclosure, as the process of foreclosure has not been finalized. Once a foreclosure had been completed, it is considered a foreclosed property.
Pre-Foreclosure – During the stage of being in pre-foreclosure, terms such as Notice of Default (NOD) and Lis Pendens is used. A NOD is used in non-judicial foreclosure states and it is a filing with the county in which the property is located that the foreclosure process has started. A Lis Pendens is used in judicial foreclosure states and this filing notifies to the homeowner that they are being sued for the breach in contract of default on the property.
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