What is 'Foreclosure - FCL'

A situation in which a homeowner is unable to make full principal and interest payments on his/her mortgage , which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated in the mortgage contract. One month after the homeowner misses a mortgage payment, he/she is in default and will be notified by the lender. Three to six months after the homeowner misses a mortgage payment , assuming the mortgage is still delinquent and the homeowner has not made up the missed payments within a specified grace period, the lender will begin to foreclose. The farther behind the borrower falls, the more difficult it becomes to catch up, since lenders add fees for payments that are 10 to 15 days late.

BREAKING DOWN 'Foreclosure - FCL'

Each state has its own foreclosure laws covering the notices the lender must post publicly and/or with the homeowner, the homeowner's options for bringing the loan current and avoiding foreclosure, and the process for selling the property. In 22 states – including Florida, Illinois and New York – judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by proving the borrower is delinquent.

If the foreclosure is approved, the local sheriff auctions the property to the highest bidder to try to recoup what the bank is owed, or the bank becomes the owner and sells the property through the traditional route to recoup its loss. The entire judicial foreclosure process, from the borrower's first missed payment through the lender's sale of the home, usually takes 480 to 700 days, according to the Mortgage Bankers Association of America.

The other 28 states – including Arizona, California, Georgia and Texas – primarily use non-judicial foreclosure, also called power of sale, which tends to be faster and does not go through the courts unless the homeowner sues the lender.

In some cases, to avoid foreclosing on a home, lenders will make adjustments to the borrower's repayment schedule so that he/she can afford the payments and thus retain ownership. This situation is known as a special forbearance or mortgage modification.

RELATED TERMS
  1. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  2. Right Of Foreclosure

    A lender's ability to take possession of the property used to ...
  3. Foreclosure Filing

    The initial legal process of selling a mortgaged property that ...
  4. Serious Delinquency

    When a single-family mortgage is 90 days (or more) past due and ...
  5. Jingle Mail

    A situation where a homeowner mails his or her house keys to ...
  6. Foreclosure Buyout

    A refinancing program that allows a homeowner to avoid foreclosure ...
Related Articles
  1. Personal Finance

    Avoid Foreclosure: How To Handle An Underwater Mortgage

    Foreclosure is the biggest fear of any struggling homeowner. These tips just might save your credit rating.
  2. Investing

    Helping Clients Navigate Short Sales And Foreclosures

    Both buyers and sellers can benefit from a real estate professional experienced in dealing with short sales and foreclosures.
  3. Investing

    How To Delay Foreclosure

    While losing a home can be a traumatic event for you and your family, it's best to find ethical means of delaying or avoiding foreclosure, even if it takes more time.
  4. Investing

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  5. Investing

    Avoiding Foreclosure Scams

    If you want to save your home, avoid bogus offers and take matters into your own hands.
  6. Personal Finance

    How to Work With Your Lender if You Can't Pay Your Mortgage

    Homeownership is a dream but when you can't pay your mortgage it becomes a nightmare. In the wake of the housing meltdown lenders are more willing to help.
  7. Personal Finance

    Mortgage Options for Underwater Homeowners

    Find out what options are available when your mortgage is greater than the value of your home.
  8. Personal Finance

    Your Mortgage: When It's Time to Walk Away

    Mathematically speaking, walking away can sometimes be the most prudent choice. Find out how to run the numbers.
  9. Investing

    What Is A Short-Sale Property & How Does It Work?

    A short sale is an alternative to foreclosure whereby indebted owners get permission from a bank to sell their house for less than amount of the mortgage.
  10. Investing

    What Homeowners Need To Know About Zombie Titles

    Understanding how the foreclosure process normally works - and how it dysfunctions in today’s market - will help you avoid becoming a victim.
RELATED FAQS
  1. What’s the Difference Between a Mortgage Lender and a Mortgage Servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  2. My mortgage payments are no longer affordable; is there anything that I can do to ...

    The most important thing for you to remember if you find that you may not be able to make this month's mortgage payment is ... Read Answer >>
  3. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  4. Is homeowners' insurance required by law?

    Learn why it is always wise to protect your home with insurance even if it is not required. Understand how high-deductible ... Read Answer >>
  5. What is Foreclosure Investing?

    Foreclosure investing, despite the promises of late-night television infomercials, is not for the inexperienced. Read Answer >>
Hot Definitions
  1. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  4. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  5. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  6. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
Trading Center