Foreclosure

Foreclosure is the legal means by which a lender can take possession of your home.  When a mortgage is created, the home is used as collateral to secure the loan.  Through the creation of a mortgage, the borrower guarantees repayment of the loan's outstanding balance.  The home itself is a part of that guarantee, which reduces the risk to the lender.  If payment on the mortgage stops, the lender is legally allowed to take the home from the borrower.  During foreclosure, you are required to move out from the home, and the property will be sold by the lending institution.

The borrower can avoid foreclosure by making timely payments to the lender.  The foreclosure process itself can have significant impact on the borrower's credit history, credit report, and credit score.  Foreclosure will make obtaining new credit more difficult in the future.