The legal process by which the lender takes back a home from a borrower who has stopped paying the mortgage. The home is then sold to recover the loan balance.
Foreclosure is the legal process that begins when a borrower falls significantly behind on mortgage payments — typically 120 days delinquent or more. The lender, exercising the lien they recorded at closing, takes legal action to take possession of the home and sell it to recover the unpaid loan balance.
The process varies by state. Judicial foreclosure states (like Florida, New York) require the lender to file a lawsuit and get a court order — typically takes 6–18 months. Non-judicial foreclosure states (like Texas, California) allow lenders to foreclose via a trustee without going to court — can be as fast as 3–6 months.
Foreclosure is devastating: you lose the home, you lose any equity, your credit drops 150–250 points, and you're typically ineligible for a new mortgage for 3–7 years. Always contact your servicer early if you're struggling — forbearance, modification, or short sale are all far better outcomes than letting foreclosure proceed.
Example
After 6 months of missed payments without contacting the servicer, a lender in Texas (non-judicial state) files a notice of trustee sale. The home is auctioned 21 days later. The borrower loses the home and any equity, and the foreclosure stays on their credit report for 7 years.
Also known as
foreclose, foreclosed home, home foreclosure, deed in lieu
Source:
CFPB