When you don't pay your home mortgage payments on time, your bank will eventually trigger the foreclosure process. This process allows the bank to try to recover as much of its money as possible by repossessing your home and then selling it in a foreclosure sale.
Once a bank initiates the foreclosure process, there are four primary ways that it may come to an end. Here they are:
The loan's default amount is paid off
The borrower pays off the default amount of the loan in time to reinstate his or her loan in good standing. This payoff is achieved during the grace period -- also known as the pre-foreclosure period -- specified by Texas state law.
The property is sold to another party before foreclosure
The borrower sells off his or her property to another party in the pre-foreclosure time period. By selling the property, the borrower acquires sufficient capital to pay off the remaining loan balance, repair his or her credit history and render the foreclosure process moot.
The property is sold at public auction
Another party purchases the borrower's home in a public auction at the conclusion of the foreclosure process.
The property returns to the lender
The lender secures ownership of the property -- typically in order to resell it. The lender might take ownership by way of its agreement with the borrower, or it might take it during pre-foreclosure. Properties that have been repossessed through foreclosure are classified as Real Estate Owned by the Lender (REO) properties.
If your family is facing the threat of having your home foreclosed, it's important to act fast if you want to avoid the above four outcomes. Depending on your situation, quickly selling the property during pre-foreclosure could be an excellent option. In other situations, a foreclosure defense or bankruptcy could help your situation.
Source: RealtyTrac, "Foreclosure Process," accessed Dec. 20, 2017