A foreclosure is the process of forfeiting your homeowner’s rights because you cannot pay your mortgage loan.
There are three steps in the foreclosure process:
Pre-Foreclosure: When you fail to make payments on time, your mortgage company can decide to initiate the foreclosure process. You will receive a Notice of Default that has been filed with your local records authority. The notice will include information about how much you need to pay and by when. If you can meet the payment terms, the foreclosure process ends
Auction: If you cannot or do not meet the payment terms as outlined in the notice, the property will go to a foreclosure auction. At the auction, the mortgage company will try to recoup the amount owed. Homes are often sold for cash payment.
Post-Foreclosure or REO (Real Estate Owned): If the home does not sell at auction, the mortgage company will take possession of the property.
A foreclosure remains on your credit report for seven years after the filing date.