A foreclosure terminates all rights of the homeowner covered by a mortgage. During the foreclosure process, the estate becomes absolute property of the lending institution that holds the mortgage. More and more borrowers are defaulting on their mortgages each month, causing an increased risk of foreclosure. The real estate boom in that happened between 2002-2006 allowed many unqualified borrowers to take out excessive mortgages at inflated prices. Millions of homeowners are now living with mortgages they can no longer afford and they fall behind on payments.

Some of these homeowners are able to work their way out of foreclosure by catching up on payments and curing the loan. However, more than half a million homes went through foreclosure in 2010, and more homeowners are threatened with the practice due to late payments and defaults.

What is the procedure for a foreclosure?

The foreclosure process begins when the homeowner fails to make payments of the money due on the mortgage at the appointed time. This may be due to unemployment, divorce, medical leave, terms of the loan, poor property management, and even death.

Foreclosure does not begin after a single payment is missed, but missing a payment can affect your credit score. There is no single answer as to how many missed payments a borrower can have before foreclosure begins. It all depends on the action the creditor decides to take. Some may only miss a few payments, whiles others may fall behind for many months. Lenders do not want to foreclose on properties as it is a risky and expensive process. They will often seek a compromise and exhaust all avenues to help solve the problem, with foreclosure being a last resort.

Once the bank does decide to proceed with a foreclosure on your property, they will send a formal demand for payment in the form of a letter. This letter of notice is referred to as a Notice of Default (NOD). This is typically issued after 3 months of missed mortgage payments. Keep in mind that the notice is a threat to sell your property, terminate all your rights in that property and evict you from the premises.

How do I stop foreclosure?

One of the best things you can do to prevent foreclosure is work with your bank. Do not ignore the issue as it will only get worse. If you have trouble paying your mortgage, you have several options including forbearance, short sale, loan modification, refinancing, and a repayment plan. Talk with your lender about these options.

In addition, there is a multitude of real estate investors looking to purchase homes from sellers who are in financial duress. Talk with a local real estate agent or private lender to find an investor in your area. Real estate professionals and hard money lenders work with investors all of the time and most are in the market of purchasing short sale properties. Short selling your home is far more advantageous than foreclosing.

Written by Kellie Davis of Capital Fund I Private Lending. I invite you to learn more about your foreclosure options at http://www.capitalfund1.com.