A foreclosure legally allows your lender to take back your home and resell it if you fail to make your mortgage payments. Not only does foreclosure have long-term, damaging effects on your credit history, it also becomes a matter of public record.
Foreclosure occurs on a property for several reasons.
Monthly mortgage payments may not be made, or some type of fraud is involved and the lender has decided to accelerate the loan. An acceleration letter will be sent requesting the full amount past due. This amount is to be paid by a specified date. If the amount is not paid, the lender will accelerate the loan, and foreclosure proceedings will begin. A foreclosure package will be forwarded to an attorney or trustee by the lender, depending on the state in which the property is located, and legal action will commence.