When you sign a mortgage contract, you agree to certain conditions determined by the lender. Typical conditions include making your mortgage payments on time, paying property taxes and keeping your homeowner's insurance policy up to date. As long as you meet these conditions, the lender won't bother you. However, if you break one, the lender may take action.
Mortgages typically include an acceleration clause, which is a clause that allows the lender to demand the full balance of the mortgage if you break any of the conditions in the contract. Since most people can't afford to cough up that much money on a moment's notice, breach of contract often leads to foreclosure. However, lenders will give you at least 30 days to solve the problem before they begin the foreclosure process. For example, if you are behind in payments, you will have 30 days to pay what you owe.
As soon as you break one of the conditions of your mortgage, the lender will send you a letter to let you know that you are in breach of contract. The letter will also tell you how much time you have to pay your mortgage balance or fix the issue before the lender will foreclose on the home. If you don't fix the problem during this time, foreclosure begins, and the lender will get ready to sell your home.
To stop foreclosure altogether and put your mortgage back in good standing, you must fix the problem that caused the breach. For example, you may need to pay a past-due balance and some late fees, pay your property taxes or renew your homeowner's insurance policy. If you aren't able to fix the problem, you can try to negotiate with the lender, or you can let it foreclose on your home.
Even after the lender begins foreclosure, you can usually stop the process by resolving the issue that started it. It's also possible to stop foreclosure by filing bankruptcy. However, bankruptcy is a temporary fix, since the lender can resume foreclosure as soon as the case is closed. To stop foreclosure after bankruptcy, you still must fix the problem that caused the breach of contract. If you are in breach of contract because you weren't paying property taxes or homeowner's insurance payments, the lender may force you to open an escrow account so he can make these payments for you in the future.
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