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When you hear the word "foreclosure" your heart may start pumping a little faster and the adrenaline may begin to rush and a panic attack may be imminent.  Foreclosure is the term used for the legal process followed by the lender when a homeowner is not making payments on his mortgage and goes into a state of default.  The lender follows the process until he regains possession of the house and can then sell it through a public sale or a sheriff's sale.  At that point, the home has been officially foreclosed on. 


The lender may allow the homeowner to sell the home on a "short sale" which is basically selling the home at a loss in order to forestall the foreclosure.  The bank will have to agree to the final sales price and will take the lower amount as payment in full for the mortgage that is owed. 


At almost any point during this legal process, the homeowner could pay back the amount owed and avoid the foreclosure.  One of the ways that many people do this is to get a mortgage refinance which pays off the current loan and gives the homeowner a new start.  The mortgage refinancing may help to lower the monthly payments to a more manageable level so that the homeowner is more likely to be able to make the payments.  Even if you have a bad credit mortgage, it can make sense to do a mortgage refinance if you have quite a bit of equity in the home. 


Although you may have heard stories of the foreclosure process taking months or even years to complete, it can and often does happen relatively quickly.  Although you may hear that you have to be 90 days or more past due on a house payment, the bank can actually begin the process when your payment is only 45 days late. Depending on the laws of the state you are in, you can be forced out of the home within six months of that missed payment.  Occasionally, the lender will allow you to stay in the home for a short while if you are still making arrangements to house your family. 


Understanding that foreclosure is a very real thing can help the homeowner do what is necessary to keep it from happening to them. If you know you are going to miss a payment and your financial situation is not a pretty one, you should talk to a lender about a mortgage refinance as soon as possible and well before your payment is 30 days late.  With the very low rates that are available today, you should be able to refinance to a lower payment, especially if you can follow the process before your payment is counted as being late. 


If you have missed payments, you need to be sure to answer all phone calls from the lender.  If you avoid calls, they may either think that the property has been abandoned or may think you don't care about the situation.  If they can't communicate with you, they may hurry through the foreclosure process.  On the other hand, if you communicate with them and help them to understand your situation, they will be more willing to work with you.  If you only missed one payment but could get on track otherwise, they may have options to tack one or two payments onto the end of the loan to help you get through a rough spot.  If you have lost an income source, you will probably miss multiple payments, and the lender may want to try doing a loan modification.  If you wait too long to discuss your situation with the lender, or if you simply don't communicate with him, these options may not be available to you. 


By being educated on the foreclosure process and by keeping the lines of communication open, you may be able to avoid it altogether.