When you bought your home you had a good job with a steady paycheck. Your spouse also was working. There was no problem in paying the monthly mortgage payments. Now the situation has changed. Your company has downsized and you are unemployed. Your savings has run out and your mortgage payment still has to be paid every month. You have received letters from the mortgage lender regarding the late and missing payments. What should you do? The last thing you want to do is ignore the situation or before you know it you will find your self and family and belongings sitting out on the street. Defaulting on mortgage payments entitles the lender to initiate foreclosure proceedings. Contact the lender and tell him of your present financial situation and that you are trying to work out the problem. Truthfully answer their questions and provide them with whatever information they need. They may advise you to try to sell the house before they have to begin foreclosure. This may be the best approach for the borrower if there is no way he can pay the mortgage payments.
Foreclosure is a legal mechanism for a lender to recover his money when a borrower defaults on mortgage payments. The proceedings begin with a notice of default filed by the lender. This marks the beginning of the grace period, known as the period of pre-foreclosure. This gives the borrower the chance to bring his mortgage payments up to date and reinstate the mortgage or to sell the property and pay-off the mortgage. If the borrower does the latter, he avoids the foreclosure showing up on his credit report for a period of seven years.
At the end of the pre-foreclosure period, the lender can take possession of the property and the borrower will have to move. The lender's usually sell foreclosed property at auction to recover their money. This is their legal right to do so. The mortgage is a secured debt with the property used as collateral. When a secured loan is defaulted on, the lender has the right to the collateral.
People can buy foreclosed property at auctions. This includes property foreclosed on by the government when people have government secured loans through HUD and other agencies. These properties can be viewed on various websites and can be bid on by anybody who has the money to pay for them.