Definition
The legal process a lender uses to take and sell a home after the borrower falls far behind on mortgage payments.
What it means
Foreclosure lets a mortgage lender recover what it is owed by selling the property. Depending on the state, it happens through the courts (judicial foreclosure) or outside court under the mortgage contract. Federal mortgage servicing rules from the CFPB generally prohibit a servicer from starting the first foreclosure filing until a borrower is more than 120 days delinquent, and they limit dual tracking while a complete application for help is being reviewed. Options that may avoid foreclosure include repayment plans, forbearance, loan modification, short sale and deed in lieu. HUD-approved housing counseling agencies offer free or low-cost help. Foreclosure seriously damages credit and stays on credit reports for seven years. Be wary of companies that charge up-front fees to save your home.
Example
A homeowner who misses payments starting in March is generally protected from a first foreclosure filing until after day 120, around early July, giving time to apply for a loan modification.
Illustrative numbers only. Your situation will differ.