What is Foreclosure?

​fore·clo·sure

/ˌfôrˈklōZHər/

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Learn to pronounce

​​noun

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1. the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.

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What does the prefix foreclose mean?

Foreclose comes from the Old French forclore, "exclude or shut out," which led to its sense of "bar from happening," and also the legal meaning, "bar someone from redeeming a mortgage." If a bank forecloses on a property, they take it away from the person who lives there.

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What does foreclosure mean in simple words?

Foreclosure is a process that begins when a borrower fails to make their mortgage payments. When a home is foreclosed upon, the lender typically repossesses and attempts to sell the house. This happens because mortgage loans are secured by real estate, meaning your home is used as collateral.

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What is a foreclosure notice?

Foreclosure is when someone who has lent money to a person or organization so that they can buy property takes possession of the property because the money has not been repaid.

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How long is the pre foreclosure process?

Typically, the pre-foreclosure process will last around 120 days, but this time-period can be longer if the lender files the foreclosure complaint after the required 120-day waiting period.

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What happens during foreclosure?

When a homeowner stops paying on a loan used to purchase a home, the home is deemed to be in foreclosure. What this ultimately means is that the ownership of the home switches from the homeowner to the bank or lender that provided the loan.

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How long does pre-foreclosure last in California?

Pre-foreclosure in California is as short as 111 days, consisting of a 90-day default notice period followed by a 21-day foreclosure sale notice period.

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How is foreclosure amount calculated?

You can calculate the prepayment charges by determining the different between the original interest rate and the current interest rate. For example, if the original interest was 7.5% and the current rate is 5.5% the difference is 2%. Multiply the principal amount by the difference in percentage – 200,000 x 0.02 = 4000.

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What is another word for foreclosure?

In this page you can discover 16 synonyms, antonyms, idiomatic expressions, and related words for foreclose, like: exclude, expropriate, forestall, preclude, shut out, deprive, confiscate, bar, seize, forbid and dispossess.

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What is the simplest solution for a foreclosure?

Reinstatement - A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it.

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What is the difference between foreclosure and power of sale?

In Power of Sale the lender sells the property; in Foreclosure the lender takes title of the property. In Power of Sale the former homeowner gets the excess profits from the sale of the property; in Foreclosure the former homeowner gets nothing.

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What is the disadvantage of foreclosure?

The most obvious disadvantage to a foreclosure is that you lose your home. When you're unable to make your mortgage payments, catch up with any late balances or reach an agreement with your bank to avoid a foreclosure, your house will be taken from you, and you and your family will need to move out.

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How do foreclosures work in the US?

Foreclosure is when the bank or mortgage lender takes possession of property that is in default, often against the homeowner's will. Your mortgage agreement states that if you stop making payments on your loan, the bank can reclaim the property through foreclosure.

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What does it mean to foreclose on a loan?

When a buyer fails to make the payments due on the loan (defaults on the loan) the lender can foreclose, which means that the lender can force a sale of the home to pay for the outstanding loan.

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What triggers a foreclosure?

Major reasons for foreclosures are: Debt, particularly credit card debt. Medical emergency or illness resulting in a lot of medical debt. Divorce, or death of a spouse or partner who contributed income. An unexpected big expense.

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Is a foreclosure the end of the world?

More than 2 million Americans have a foreclosed home, so a foreclosure is nothing to be ashamed of. More than 2 million people have a foreclosed home, so it's not the end of the world.

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Can refinancing prevent foreclosure?

Yes, you can refinance a delinquent mortgage as a way to bring a past-due home loan current and avoid foreclosure. The process of refinancing pays off the existing mortgage and replaces it with a new loan, giving borrowers somewhat of a fresh start.

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Can I refinance while in foreclosure?

It's not possible to refinance while you're in foreclosure. If you were to refinance, the best option is to be current on your payments and refinance into a more affordable payment before you're in serious financial trouble.

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Can you refinance your home if your behind on payments?

The late payments make it unlikely that you can refinance. You have probably done sufficient damage to your credit score that, even if you could refinance, the interest rate you might be offered would be little better than what you are paying today. You might instead talk to your servicer about a loan modification.

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When can bank take your house?

If you fail to respond the legal notice, the bank will wait for three to five months and then the bank will declare your property as Non-performing Asset (NPA). Once you are considered as a loan defaulter, the bank will start the procedure for taking over your house.

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What happens when your house is worth less than you owe?

While being upside down on your mortgage won't prevent you from selling your home, you will need to pay the difference between the sale price and the balance on your loan. So, if your home sells for $200,000 and you owe $225,000 on your loan, you'll need to pay the lender $25,000.

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What does surrendering your house mean?

When you file bankruptcy and surrender a home, you give the property back to the lender. When a lender forecloses on your home due to non-payment, they take the home from you. The primary difference between surrendering a home and foreclosure is the possibility of owing money after the sale.

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Strategies people have used to avoid foreclosure

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6 Ways To Stop A Foreclosure

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1. Work It Out With Your Lender. ...

2. Request A Forbearance. ...

3. Apply For A Loan Modification. ...

4. Consult A HUD-Approved Counseling Agency. ...

5. Conduct A Short Sale. ...

6. Sign A Deed In Lieu Of Foreclosure.

7. Accept that the home will be lost and joint venture to upgrade and make necessary repairs, bring property current and sell for highest value.

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What do you do when you lose your house?

MHA has a hotline you can call anytime: 1-888-995-HOPE or TTY 1-877-304-9709. You can also find a foreclosure avoidance counselor in your area. Your state's housing agency might have a foreclosure avoidance program as well. If you have an FHA loan, call the FHA National Servicing Center at 1-877-622-8525. If all else fails you can joint venture with Smart Property People and HomeSaversUS to potentially increase your property value while you plan your exit and collect on your percentage of the profits after the property sales on market for the highest possible value.  

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How long can you not pay your mortgage?

Homeowners with federally backed loans have the right to ask for and receive a forbearance period for up to 180 days—which means you can pause or reduce your mortgage payments for up to six months. Additionally, you can request an extension of forbearance for up to 180 additional days, for a total of 360 days.

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What happens if you let your house go back to the bank?

Recourse borrowers owe the full amount of the mortgage even if they deed the house back to the bank. The lender can sell the house for less than the mortgage amount and come after you for all the rest, plus fees and legal costs. Refinanced and home-equity loans are almost always recourse loans.

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How does a foreclosure affect you?

A foreclosure is a significant negative event in your credit history that can lower your credit score considerably and limit your ability to qualify for credit or new loans for several years afterward.

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How much will a foreclosure hurt my credit?

According to FICO, for borrowers with a good credit score, a foreclosure can drop your score by 100 points or more. If your credit score is excellent, a foreclosure could reduce your score by as much as 160 points. In other words, the higher your credit score the more impact a foreclosure will have.

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Will my credit score go up when my foreclosure falls off?

Even if you did nothing except wait for time to pass, your credit scores would improve simply because late payments and foreclosure have less impact on your scores as they age. And when the foreclosure eventually is removed from your credit reports, it will no longer have any negative impact at all.

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Can you use equity to avoid foreclosure?

California residents are able to keep the equity in their homes, even after a foreclosure. However, penalties, fees, and the home's value can undercut the amount of equity. By filing for Chapter 13 Bankruptcy, homeowners could avoid foreclosure altogether.

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What happens to equity in foreclosure?

So what happens in a foreclosure with equity in the home? Simply put, the equity remains yours, but it will likely shrink during the foreclosure process. Need assistance collecting your funds. We offer a program where we handle all of the paperwork and pay all of the fees. Click here to join.

 

Can you recover from a foreclosure?

A foreclosure can cause your credit scores to drop dramatically, but it's possible to bounce back from one. After your home is foreclosed upon, you can immediately start taking steps to restore your credit.

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How long does a foreclosure stay on my record? 

Seven years - Similar to medical debt and certain bankruptcies, it takes seven years for foreclosures to disappear from your credit report. The unfortunate news is that as long as the foreclosure is listed on your credit report, your credit score will be negatively impacted by it.

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How long does it take for a foreclosure to hit your credit?

A foreclosure entry typically appears on your credit report within a month or two after the lender initiates foreclosure proceedings. The entry remains on your credit report for seven years from the date of the first missed payment that led to the foreclosure.

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How long after foreclosure can I refinance?

In order to refinance with an FHA-insured mortgage, the borrower must wait at least three years after the foreclosure. The Federal Housing Administration is the largest government insurer of home loans in the world.

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Can you buy a house with a foreclosure on your credit report?

Foreclosure information generally remains in your credit report for seven years from the date of the foreclosure. Even if you have a bad credit history or a low credit score, you may qualify for an Federal Housing Administration (FHA) loan.

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What is the first step in the foreclosure process?

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1. Phase 1: Payment Default.

2. Phase 2: Notice of Default.

3. Phase 3: Notice of Trustee's Sale.

4. Phase 4: Trustee's Sale.

5. Phase 5: Real Estate Owned (REO)

6. Phase 6: Eviction.

7. Foreclosure and COVD-19 Relief.

8. The Bottom Line.

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What are foreclosure charges?

A foreclosure charge, or prepayment penalty, is the extra amount that lenders charge you for closing the loan before the tenure is over. Many lenders generally have a lock-in period between one to two years, during which you can't foreclose the loan. If you do, you will have to pay a higher prepayment penalty.

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Can bank take foreclosure charges?

In this connection, it is clarified that banks shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s).

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How do investors know my home is being foreclosed on?

1. Bank websites. Banks often list their foreclosed properties for sale online

2. Government-owned listings

3. County's offices and website

4. Foreclosure-listing services

5. Real estate agents

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How do investors benefit from foreclosed homes?

Lower prices: Foreclosed homes are often cheaper.  One undeniable benefit is that foreclosed homes almost always cost less than other homes in the area or they are listed below market value. This is because they're priced by the lender, who wants the home off of their books. Click here to learn how to become a real estate investor.

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How can I stop a foreclosure auction immediately?

If a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. The automatic stay will stop the foreclosure in its tracks. Once you file for bankruptcy, something called an "automatic stay" immediately goes into effect.

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What is foreclosure defense?

Homeowners have been fighting back by stalling foreclosure proceedings or stopping them altogether. The legal strategy employed by these homeowners is known as foreclosure defense. The goal of the foreclosure defense strategy is to prove that the bank does not have a right to foreclose.

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What is a foreclosure bailout loan?

A "foreclosure bailout loan" is a mortgage loan designed to stop a foreclosure. Usually, the foreclosure bailout loan will refinance the entire balance of the existing loan. But some lenders make loans in an amount that's just sufficient to reinstate the defaulted loan.

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Can my mortgage company refuse payments?

Your mortgage company may refuse payment from you if they have started the foreclosure process. They may attempt to collect the full amount of arrears that you owe to bring your account up to date. If you go to court, you can force the lender to accept payments and start a payment plan to catch up.

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Can I give my home back to the bank?

The answer to this question is yes, you can give your house back to the bank to avoid foreclosure in a process known as deed in lieu of foreclosure. Before pursuing this option, first look into a short sale, loan modification, or simply selling the property.

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What happens if you give up a mortgage?

Voluntary surrender of your home can remove your mortgage liability. Lenders take the property, you vacate the home and the lender resells the home.

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How do I give up my mortgage?

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7 Ways To Get Out Of Your Mortgage

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1. Sell Your House. One of the best and fastest ways to get out of a mortgage is to sell the property and use the proceeds to pay off the loan. ...

2. Turn Over Ownership to Your Lender. ...

3. Let the Lender Seek Foreclosure. ...

4. Seek a Short Sale. ...

5. Rent Out Your Home. ...

6. Ask for a Loan Modification. ...

7. Just Walk Away.

8. Joint Venture with Smart Property People

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What are the advantages of foreclosure?

3 benefits of foreclosure that you may not realize

• You can negotiate the terms of your loan. While you may think a foreclosure automatically means you'll lose your home, that's not always the case. ...

• Foreclosures help you save money. ...

• Foreclosures give you a fresh start.

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What is the first item to be paid out of foreclosure funds?

the first mortgage. any properly recorded junior liens. special assessment taxes, and general taxes. The order of payment in a foreclosure is; the cost of the sale (advertising, attorney fees, trustee fees, etc.), any special assessment taxes and general taxes, the first mortgage, whatever is recorded next.

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Can foreclosure charges be waived off?

Any interest he/she was supposed to pay post pre-foreclosure will automatically be waived off on closing the loan. However, one must take into consideration the home loan preclosing charges that a bank may charge before preclosing.

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How can I fix my credit after a foreclosure?

Removing foreclosures from your credit report requires filing a dispute with each of the three major credit bureaus. These credit bureaus have the right to dismiss any disputes they deem frivolous. The credit bureaus examine each dispute's communication and proof before deeming it worthy of being considered.

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What is the biggest cause of foreclosure?

Disease: Unexpected medical bills are the leading cause of bankruptcy in the U.S., so it makes sense that they would lead to foreclosure as well. Chronic illness, catastrophic emergency, and inadequate health insurance can all create financial stress that ultimately means missing mortgage payments.

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What state has highest foreclosure rate?

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Based on data from ATTOM, these are the 10 states with the highest rates of foreclosures from the first three months of 2022.

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1. Illinois. One out of every 791 housing units was foreclosed on in Illinois in the first quarter of 2022.

2. New Jersey. ...

3. Ohio. ...

4. South Carolina. ...

5. Nevada. ...

6. Delaware. ...

7. Indiana. ...

8. Florida. ...

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Which is worse short sale or foreclosure?

Short sales are less damaging to a credit report than a foreclosure. A foreclosure is when a home is seized and put up for sale by the investor or bank. Every mortgage contract has a lien on the property that allows the bank to control the property if the homeowner stops making mortgage payments.

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Which is worse foreclosure or Chapter 13?

A foreclosure or short sale, as well as a deed in lieu of foreclosure, are all pretty similar when it comes to impacting your credit. They're all bad. But bankruptcy is worse. Going through a foreclosure tends to lower your scores by at least 100 points or so.