Foreclosures, near North Minneapolis, Nov 2007

Foreclosures is a situation in which a homeowner is unable to make full principal and interest obligations on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as agreed in the mortgage contract. One month after the homeowner misses a mortgage payment, he/she is in default and will be notified by the lender. Three to six weeks after the homeowner does not show for a mortgage payment, supposing the mortgage is still delinquent, and the home owner has not composed the missed payments in just a specified grace period, the lender will get started to foreclose. The particular farther behind the customer falls, the more difficult it becomes to capture up since lenders add fees for payments that are 10-15 days late.

Each state has its own foreclosure laws within the notices the lender must post publicly and/or with the homeowner, the homeowner's choices for bringing the loan current and avoiding foreclosure, and the method for promoting the property. In 22 states – including Florida, Illinois, and New York – judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by showing the borrower is overdue.

If the foreclosure is approved, the local sheriff auctions the property to the highest bidder to try and recoup what the bank is due, or the bank becomes the owner and offers the property through the traditional route to recoup the loss. The entire judicial foreclosure process, from the borrower's first, missed repayment through the lender's sale for the home, usually requires 480 to 700 days and nights, in line with the Mortgage Bankers Organization of America.

The other 28 states – including Arizona, California, Georgia and Texas – generally use non-judicial foreclosure, also referred to as the power of sale, which is often faster and really does not go through the courts unless the homeowner sues the lender.

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