Foreclosure is a legal proceeding in which the bank takes possession of and sells a mortgaged property when the borrower does not meet his or her contractual obligations, that is delinquent on payments.

Foreclosure devastationMany bowrrowers fail to realize the seriousness of foreclosure as a legal action against them. Foreclosure is not simply your bank taking your property away; it's an act of suing a homeowner in order to take a possession of their property.

Foreclosure remains on your credit report for seven years. It is one of the worst types of credit report entries and can impact your future ability to get credit cards and loans. Do not take seriously anyone claiming that foreclosure is “not so bad.'

Unless the government, due to the recent real estate crisis, puts some new regulations in place that explicitly says foreclosure is not going to be treated as the deadly sin of personal finances, it is and will remain the major scar on individual’s financial face.

Currently, more than five million households are behind on their mortgages and risk foreclosure.

A Foreclosure process typically follows these steps:

1) Homeowner receives the foreclosure process alerts the as soon as they are late on their payments.

2) Each bank has its own designated period of allowable late payments a homeowner can have prior to filing a notice of default or a notice of intent to foreclose.

3) Within this period, homeowners can reinstate their loans by paying the entire default amount plus interest, attorney fees, late fees, taxes & missed payments.

4) If reinstatement does not occur, the foreclosing lien holder will file a foreclosure sale date or notice of trustee sale that must be publicly announced.

5) Some states have redemption periods before the foreclosure date, some after the sale date and some states have no redemption period at all. The redemption allows the homeowner within a specific period of time to pay the amount due in full to the lien holder to regain possession of the property.

6) Actual day of the sale, property is typically sold on the courthouse steps. If a bidder doesn't end up buying the property it will go back to the lien holder that foreclosed on the property.

7) If it goes back to the lender, typically a representative will come to the home and start negotiate with the homeowner the date and dollar amount to move out, and leave the property condition as good as possible.

After you have gone through these steps, all potential lenders, whether it's a car dealership or a bank in charge of financing your visit to a dentist is going to see a foreclosure sign plastered to your forehead. This is nothing but an alert to avoid lending you any money or a green light to charge you ridiculous interest rate.

Former homeowners after going through foreclosure usually have problems renting a decent apartment. This might event affect your chances to be hired and definitely would be a major strike against you if you ever decide to start your own business and apply for a loan.