With the ongoing economic downturn, more and more homes and properties face foreclosure over the past year or two than ever before. Besides the poor economy overall, the biggest factor is the sub-prime lending spree of the past few years that created ballooning payments and allowed people to enter into mortgages that they couldn’t manage and shouldn’t have been given.

When a home is foreclosed on, it means that the bank or lender has obtained a court order terminating the loan agreement and can take possession of the property back from the signer. This would be the bank that underwrote the original loan or mortgage agreement.

When someone takes a mortgage or home loan, the lender obtains a security interest from the borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults on payment, the lender or mortgage holder can try to repossess the property. This is a foreclosure.

While the main reason for foreclosure is failure to pay the mortgage note or loan, it isn’t the only reason. Property tax that hasn’t been paid, overdue HOA dues or assessments, even unpaid contractor bills are all problems than can lead to a foreclosure action.

The foreclosure process as it relates to a residential mortgage loan happens when the bank or other secured creditor takes possession of the property after the owner has failed to comply with the mortgage agreement. Most commonly, this is happens as a failure to meet payment of the home loan.

Once foreclosure begins, the lender will usually try to recover their principle and legal costs by selling the property. This is what foreclosing on the mortgage or loan actually is. Depending on the state, the homeowner may have a grace period to reclaim their property, however it’s obviously much more desirable not to go into foreclosure to begin with.