DEFINITION of 'Involuntary Foreclosure'

When a borrower defaults on a home mortgage loan and the lender initiates proceedings to take possession of the house and sell it to recover the debt. In an involuntary foreclosure, the borrower typically remains liable for the full amount of the debt. If the house sells for less than the amount the borrower owed on the mortgage, the borrower may still be required to pay the remaining balance.

BREAKING DOWN 'Involuntary Foreclosure'

Involuntary foreclosure is normally the last option for borrowers unable to pay their mortgages. Depending on the circumstances, a borrower may have alternatives, such as negotiating a temporary reduction in payments or refinancing the mortgage to obtain a lower payment. The borrower may also explore taking out a separate loan to repay the missed payments. If the borrower does not wish to remain in the house, it may be possible to negotiate a pre-foreclosure sale of the property to help minimize the damage to the borrower's credit rating.

RELATED TERMS
  1. Delinquent Mortgage

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

    The legal proceedings initiated by a lender in the case of mortgage ...
  3. Voluntary Foreclosure

    A voluntary foreclosure is a foreclosure proceeding that is initiated ...
  4. Short Refinance

    The refinancing of a mortgage by a lender for a borrower currently ...
  5. Mortgage Short Sale

    The sale of a property by a financially distressed borrower for ...
  6. Reverse Mortgage Financial Assessment

    A review of the borrower’s credit history, employment history, ...
Related Articles
  1. 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.
  2. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  3. Investing

    Saving Your Home From Foreclosure

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

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  5. Investing

    Avoiding Foreclosure Scams

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

    The 6 Phases Of A Foreclosure

    For many, foreclosure is still a real possibility. Make sure you're prepared and know the steps.
  7. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  8. Investing

    Can You Dispute A Foreclosure?

    The bank has foreclosed on your mortgage, but do you really have to leave? Learn how to fend off the lenders and gain the time you need to save your home.
  9. Personal Finance

    Best 3 Mortgage Calculator Websites for Canadian Residents

    Here's an overview of the key features of Canadian mortgages, and a few of the best online mortgage calculators for Canadian home loans.
  10. Personal Finance

    Mortgage Options for Underwater Homeowners

    Find out what options are available when your mortgage is greater than the value of your home.
RELATED FAQS
  1. 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 >>
  2. When Is Mortgage Insurance Typically Required?

    Learn about the situations in which borrowers may be required to buy private mortgage insurance, and discover who this insurance ... Read Answer >>
  3. How Many Mortgage Payments Can I miss Before Foreclosure?

    The status of your lender and the condition of your local housing market are some of the factors that determine how many ... Read Answer >>
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  5. 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 >>
  6. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
Hot Definitions
  1. Life Insurance

    A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the ...
  2. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
Trading Center