ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What is a Foreclosure?

Updated on December 17, 2009

When you purchase a home using a home loan and cannot keep up with your mortgage repayments to your lender, the lender has the right to foreclose on your home. This often involves the lender auctioning off your house in order to regain some of the initial investment. Through a foreclosure, the homeowner forfeits all rights to the property, and the house in question becomes the property of the lender.

What causes foreclosures?

Foreclosures happen when homeowners can no longer make their mortgage payments. This can be caused by many things, including loss of a job, job transfer to another state, divorce, high or unexpected medical bills, large amounts of debt, violation of the terms of the original loan, and death. Often homeowners suffer from high interest rates on their loans, or have a fundamental misunderstanding of the loan terms. They find they cannot afford their mortgage payments.

Different types of foreclosure

In most US states, there are two different kinds of foreclosures. The lender taking back possession of your property (repossession) as payment for what you owe is called “Strict foreclosure.” Strict foreclosures are usually outlined in the initial contract between the homebuyer and the lender. After a strict foreclosure, the homebuyer does not owe anything to the lender. The lender usually auctions off the house, with a county Sherriff or another officer of the court presiding. Legally, the winner of the auction is not allowed to pay more than you owe on the house. So the lender cannot make a profit on your foreclosure, but rather only reclaim what is owed.

The other type of foreclosure occurs when the homebuyer is notified through a formal legal notice to the homebuyer, called a Notice of Default. This notice generally is issued after three months of payments have gone unmet. The notice contains the lender’s intent to sell the property and terminate the homeowner’s rights. The homeowner will have time between receiving the notice and action on the part of the lender, in which the homeowner can take steps to prevent the foreclosure, such as filing bankruptcy. If the homebuyer takes no action, foreclosure occurs.

How to avoid foreclosure

Foreclosures damage your credit and can haunt your financial life for years to come. In order to avoid foreclosure, do not agree to any loan whose terms you don’t fully understand. If your financial situation changes or you believe you will not be able to make the payments, contact your lender immediately and be honest about your situation. Meet with an HUD-approved counselor to discuss your options.

Image Credit: basicgov, Flickr


Submit a Comment

No comments yet.


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)