What is Foreclosure? The foreclosure process enables a lender to recover the amount owed on a defaulted loan. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process is initiated when a borrower defaults on mortgage payments. The lender then files a Notice of Default or Lis Pendens.
Some of the ways a foreclosure process may end are:
The borrower pays off the default amount during the pre-foreclosure period determined by state law.
The borrower sells the property to a third party during the pre-foreclosure period. The borrower is able then to pay off the loan and avoid foreclosure and damage to credit history.
At the end of the pre-foreclosure period the property is sold in a public auction to a third party.
The lender repossesses the property and resells it on the open market.
Real Estate Owned by the lender (REO), can be repossessed either by an agreement with the borrower during pre-foreclosure or by purchasing the property at the public auction.