Q&A: How Does Mortgage Repossession Work?

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Home is more than a roof over your head. It is where you make plans, invite friends for a visit, and express yourself aesthetically. If you have a mortgage, that home is also important to the lender as the collateral securing the loan, and therefore the one asset the lender can repossess if you miss too many payments.

What are foreclosure and repossession?

It’s common to see the terms “foreclosure” and “repossession” used interchangeably, but this is not accurate. Foreclosure and repossession are like cousins who work together but do different jobs. When a homeowner stops making payments, the mortgage lender takes action to recoup as much of the investment as possible. That process — from initial contact with the homeowner to reselling the property — falls under the umbrella of foreclosure.

Once the lender has taken ownership of the home or resold it to a third party, repossession occurs. The previous homeowner must vacate the property to allow the new owners access. The repossession process can be as simple as the former owners moving out by the date requested by their lender, or it can be messy. If the previous owners have not vacated by the date requested, law enforcement may escort them out of the house. Anything left in the home, including furnishings and personal items, become the new owner’s property, and can be disposed of any way the new owner sees fit.

Today, we focus on the steps that lead to repossession, and how to avoid it. As you will see, foreclosure slowly leads to eventual repossession, which gives you time to look for alternative solutions.

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1. Contacted by the lender

Typically, if you are 120 days late on your mortgage payments, your lender will contact you (as they are legally obligated to do) to let you know where your account stands and how to prevent foreclosure.

 

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