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Foreclosure is a situation in which a homeowner is unable to make full principal and interest repayments on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated 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 months after the homeowner misses a mortgage payment, supposing the mortgage is still delinquent, and the homeowner has not made up the missed payments inside a specified grace period, the lender will commence to foreclose. Typically the farther behind the customer falls, the more difficult it becomes to get up since lenders add fees for payments that are 10 to 15 days past due.

Each state has its own foreclosure laws in the notices the lender must post publicly and/or with the homeowner, the homeowner's choices for bringing the loan current and avoiding property foreclosure, and the process for promoting the property. In twenty two states – including California, Illinois, and New York – judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by proving the borrower is late.

If the foreclosure qualifies, the local sheriff sales the property to the greatest bidder to try to recoup what the bank is owed, or the bank becomes the owner and sells the property through the traditional route to recoup the loss. The entire judicial foreclosure process, from the borrower's first, missed payment through the lender's sale for the home, usually requires 480 to 700 times, based on the Mortgage Bankers Association of America.

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

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