When you applied for a mortgage loan, you signed a mortgage contract that promises your lender to pay back what you owe. Along with this, you have given your home property as a security for your debts. This gives your lender the right to sell your property and use the money to pay for your debts in case you fail to do so.

The Notice of Default
Let’s say that you are now in the middle of your payment term and you’ve been missing your monthly mortgage. Usually, if you’ve missed three consecutive payments, your lender will issue a Notice of Default. This signals that you are only given a limited time period to settle your accounts before your lender proceeds to sell your property. The length of time a borrower is given to keep up with his debts depends on the law in your State.

In California, the length of time given is 90 days. If you still fail to pay back your debts after that period, a Notice of Foreclosure Sale will be published to you and the State. Afterwards, you only have 21 days before your property is sold and for you to move out the house.

The Foreclosure Process
Selling of a home in foreclosure is done in public where everyone has the chance to bid on the property. Of course, the home will be sold to the highest bidder. A 10% down payment is required from the winner of the bidding. Where will the proceeds go? It will be used to pay property taxes and the amount you’ve defaulted from your lender.

However, if the money from the sale of the property is not enough to pay off all your debts to your mortgage lender, you will still be accountable in paying off that amount. This is called mortgage foreclosure deficiency. A mortgage foreclosure deficiency can go from $20,000 or more depending on how much your property is worth.

In reality, a foreclosure property sale very often does not make enough money to pay off all the borrower’s existing debts to his lender. For instance, if your home property is worth $200,000 and it was sold for only $150,000, this amount is short of $50,000 to pay off everything you owe to your lender. This means you still owe $50,000 to your lender and based upon the contract that you signed you are responsible for it.

Dealing with Foreclosure
When faced with such situation, one option would be to file for bankruptcy. A mortgage deficiency is an unsecured debt, and if you do declared bankruptcy, you can get rid of this obligation. Obviously, if you let your foreclosure come this point, there’s very little you can do to protect your property. That is why everyone is advised to pay close attention to their mortgage payments.

In case of a loss of job or any other situation that will make it difficult for you to keep up with your mortgage, it’s important that you talk with your lender immediately and ask for some adjustments in your payments. Don’t wait until your lender sends out a Notice of Default before you take action. If your lender already has done so, you can still try to save your property by requesting for adjustments on your payments terms. If it comes to a point where you need to give up your property, you can still handle the selling of your property before the actual foreclosure.

About the Author
George Bents is a loan consultant with NewHorizon Finance and has been providing consumers and business owners with home loans financing since 1989. For years she has helped people with home loan problems especially pertaining to home mortgage loans and bad credit home loans. Copyright 2009

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