Are You In Default or In Foreclosure?

With all of the complex legal terms and real estate jargon, homeowners in foreclosure are presented with a long list of words that they have never heard of. Foreclosure, notice of default, lis pendens, sheriff sale, and deficiency judgment are a few of these terms that lenders and foreclosure service providers will throw around. Most times, the homeowners will be completely in the dark when it comes to figuring out what relevance these terms have to their own situations. The difference between being in default and in foreclosure is one of the most confusing concepts to foreclosure victims.

Default is a term that is used when the loan is past due by more than 30 days. A homeowner can be in default by 3 months, 6 months, 2 years, etc., without the lender ever putting the loan in foreclosure. It is up to the bank when they actually start the foreclosure process. Default is simply when the homeowners stop paying their mortgage for a period of months. They are approaching the point of being in foreclosure the longer they are in default, but default does not automatically imply foreclosure. It is at this point that they need mortgage help to get back on track with their current loan; if this is not possible, they may qualify at this time for a foreclosure loan, hard money loan, or mortgage modification.

Foreclosure, on the other hand, is the legal process by which a bank attempts to sell a piece of property to satisfy and pay off the defaulted loan. They have to go through the courts or follow the state's foreclosure laws to be able to sell the home at a foreclosure auction or sheriff sale. The bank hires local attorneys to pursue the foreclosure process, in most cases. Until they have decided to pursue the foreclosure process, however, most banks will not hire an attorney. But attorney involvement is one of the main dangers of being in foreclosure, as legal fees can approach tens of thousands of dollars, depending on the circumstances. This is an extremely important reason that homeowners should do everything they can to stop foreclosure as soon as possible. Every day, the lawyers can add more legal fees, making it impossible for the foreclosure victims to save the home or even sell the house for a profit.

Default is when a homeowner is falling behind on the monthly mortgage payments. It is at this point that they should be researching every option they have to get back on top of their payments, or seek mortgage help from their lenders or a reputable third-party loan company or loss mitigation specialist. Foreclosure is when the bank sells the house to pay back the loan that the homeowners are behind on. This is the step where attorneys are hired to sue the homeowners, making it increasingly important for them to find a way to stop foreclosure before they can no longer afford to pay back the missed payments, interest, and growing legal fees.