When you fail to make regularly scheduled debt payments, you fall into default. If you default on an unsecured debt or a debt tied to property other than your home, the creditor has no claim on your property and therefore cannot seize your home. However, if a creditor secures a debt by placing a lien on your home, then you can lose your home if you fall behind on your debt payments.
Home Loans
Most instances of foreclosure involve mortgage companies foreclosing on delinquent borrowers. If you fail to make a mortgage payment within 30 days of the due date, your loan goes into default. Your lender can demand full payment of the entire loan balance once you go into default and if you fail to settle the matter, the lender can foreclose. The foreclosure process typically takes between three to six months to reach its conclusion.
Second Mortgages
Paying your first mortgage on time does not protect you from losing your home if you fail to make payments on your second mortgage or home equity line. As a lien holder, the second mortgage company can foreclose on your home if you go into default. The lender files a foreclosure motion at your county courthouse, a foreclosure sale occurs and the proceeds are used to satisfy your first mortgage with any remaining proceeds go to the second lien holder. If your home sale does not raise enough money to settle both liens, the lien holders can, in some states, sue you in order to collect funds to settle the remaining debt.
Other Creditors
When you fail to pay your credit card payments or pay vendors for goods and services, you default on your debt. Laws in many states enable creditors of all kinds to place a lien on your property when you fail to settle a debt. If the judge allows the creditor to place a lien, you must settle the debt owed or risk foreclosure. Creditors such as credit card companies can foreclose on your home even if you have made your mortgage payments on time. The foreclosure sale proceeds are first distributed to mortgage lien holders and any remaining funds go to the other creditors.
Non-Judicial Foreclosure
In some states, homeowners associations have the legal right to foreclose on your home for non-payment of association dues. Typically, HOAs must go to court to foreclose on your home but some states have laws that allow for non-judicial foreclosures. In a non-judicial foreclosure, an HOA can foreclose simply by filing a foreclosure motion with the local county. You have no opportunity to defend yourself in court. Additionally, if you have no mortgage on your home, the HOA can sell your home for an amount equal to the association fees you owe. Therefore, you could lose your home for a few hundred dollars of debt.
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