In the current financial and economic crisis, there are increasing news and reports on bankruptcy and foreclosures in the print and electronic media. For majority of us who may be under a financial crunch or suffering a job loss, this is the time to take stock of our finances as a whole, to avoid spiraling into a bankruptcy or foreclosure scenario.

If you have taken a loan by pledging your fixed property like your house as mortgage from a lender then you should know what the consequences are in case you miss the payment of loan installments in time. You should know what foreclosure is, connected with non payment of mortgage installments and from which point of time your mortgage company initiates foreclosure procedure against you.

If you have failed to make a payment on your home loan for the first time, the action taken will be light. The foreclosure procedure is initiated with a delinquent payment notice through an attorney. This notification is a warning signal to the homeowner, to catch up on the monthly payments. The homeowner is often able to contact the lender to create an extension for repayment of the loan.

At this point of time it is still at the discretion of the mortgage company to give you lenient options to proceed with payments. If you fail to convince the lending company about the reasons for your failure to meet mortgage conditions and you become a defaulter for a second time then you can sense your down fall in which losing your home is unavoidable.

When you become a defaulter for second time then the mortgage company will not hesitate to send you a legal demand notice and from here onwards you are responsible for the legal expenses of the mortgage company and your burden will be more with late fee penalties. In a foreclosure procedure a mortgage company can demand repayment of the full amount in lump sum and from here it is a Herculean task to escape from losing your home.

Lump sum or full payment is an important clause in any mortgage contract which is called an acceleration clause. Once the acceleration clause comes into effect then you will be left with only two options- either repay the full loan amount in a single installment or face final foreclosures procedures. Now the local sheriff will send a certified letter to you about the foreclosure of your property.

From this point on, there will be several legal proceedings leading up to your home being auctioned off. You will be unable to do anything other than to watch your dream home bought by a complete stranger without your approval.