The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Chapter 8. Foreclosure Basics and Rescue Scams

I never wonder to see men wicked, but I often wonder to see them not ashamed.

—Jonathan Swift, "Thoughts on Various Subjects"

The information in Chapters 9 and 10 will show you how to fight foreclosure and save your home. But we think you should first know what your lender can do by understanding what foreclosure is and how it works. If you are in the midst of the foreclosure process, we present specific defenses you can use. We also discuss what you have to watch out for if you're near foreclosure. Instances of vultures and scam artists preying on homeowners are on the rise!

What Is Foreclosure?

Foreclosure is a state-regulated legal process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of your real property (the house) securing the loan. Each state has variations in how it allows financial institutions to process foreclosures but foreclosure processes share the same basic steps.

Foreclosure proceedings can begin after a single missed payment, but most banks and lenders have a grace period for late payments, usually with a fee added on. After the second missed payment, however, you can expect to start getting phone calls. Many lenders will only accept both late payments to bring the loan current. They also may refuse any partial payments.

Once you fall three months behind, your lender will likely ramp up collection efforts and commonly will begin the foreclosure process. ...