Foreclosure is a grave situation in which the lender takes over or repossesses the home or property when its owner is in breach of regular repayments of a loan.
This is done by due process of law involving the county sheriff or by direct auction.
Foreclosure results in damage to an individual's image and loss of credit-worthiness, which the borrower should preclude by all means.
If the auction amount is not sufficient to cover the mortgage amount, the lender may opt for deficiency judgment by which the rest of the amount can be settled through the Department of Housing and Development (HUD).
The principal debtor stands in further debt to the HUD.
The borrower has to be honest and approach the lender, who usually will be a bank or secured creditor, with his clarifications.
Convinced of the borrower's ability to pay the future installments, the bank or creditor may allow reduction or suspension of payments due.
One way to avoid foreclosure is to opt for mortgage modification by which the mortgage deed would be re-drawn and the period of repayment extended and installment amounts reduced.
Another option is to sell the house or property before foreclosure proceedings begin.
The attempt would be successful only if buyers could be convinced of the viability of the property and that there would not be further encumbrances.
If nothing works to retain the home or property by refinancing or modification of the mortgage, the mortgager can give back the property title to the lender.
This way, the lender will take over or repossess the home or property after executing a deed-in-lieu of foreclosure.
For the borrower, credibility is what counts more than property; as such, he or she should try to prevent foreclosure.