Foreclosure

• Foreclosure processes vary by state, but if you stop paying a mortgage the lender will eventually foreclose. If you do not contact the lender or ignore the lender's attempts to contact you, the foreclosure process can start quickly. Foreclosure can begin within three to six months after the missing the first payment.
  
  

Legal Process

• Most foreclosures go through the court system. When a lender forecloses, it files a lawsuit in the state the property is located in. You will receive notice of the lawsuit and if you cannot catch up with your payments within the specified time frame, the property will revert to the lender for sale by auction. Some mortgages have a power of sale clause written into the mortgage contract and if allowed by state statute, the mortgage company can sell the property at auction without judicial process.
  
  

Jingle Mail

• So many homeowners have walked away from their homes and mailed the keys to the lender that this process has an industry term associated with it -- jingle mail. Unfortunately, this process does not stop foreclosure or the resulting damage to your credit score. Foreclosures typically reflect on a credit score for at least seven years. There is an additional problem in that some states will hold you accountable for any shortfall that occurs when the lender sells the property at auction.
  
  

Deed in Lieu

• If the mortgage is not severely upside down, some lenders may take the property deed in lieu of foreclosure to avoid legal expenses associated with the process. If you cannot pay according to the mortgage contract, the wisest course of action is to open a dialog with the lender. There are many mortgage modification programs available, and most lenders are willing to work with you rather than go through the expensive foreclosure process.