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 payment on the outstanding balance of the loan.  The home itself is a part of that guarantee that 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 a 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 and credit score appearing in a credit report.  Foreclosure can make credit more difficult to obtain in the future.