Term Tuesday: Foreclosure

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A foreclosure is a legal process which occurs when a property is repossessed by the bank due to lack of payment on the mortgage. For example, if the property's mortgage holder falls behind on the loan payment, the financial institution that holds the mortgage can claim ownership on the property after a specified period of time.

The lien holder must first file an NOD (Notice of Default) outlining the time frame in which the property owner must correct the default or relinquish the property. If the property holder is unable to continue payment, they might attempt a short sale with the help of an experienced real estate agent.

Foreclosed properties are also described as real estate owned (REO) or bank-owned properties.