To protect themselves from losing money, banks and other financial institutions require collateral. This collateral is held by lien until the loan is paid in full. When buying a parcel of land or a home, the common rule is that the property itself stands good for the loan, minus the down payment required.

In all reality, until you've fully paid back the loan, the bank literally owns the property. If for some reason you lose your job, become ill or are in an accident and are not able to work and therefore, can't keep up with the monthly payments, the bank may foreclose.

When a loan enters default the financial institution has the right to take possession of the property which will then be sold to repay the balance that is owed on the loan. Often talking with the lender can give you a little extra time to make good on the delinquent payments and avoid foreclosure.

Usually the threat of house foreclosures only occurs after several regular monthly instalments are missed, but the laws to initiate the foreclosure process are different in each state.

The foreclosure process will begin with a letter informing you of the actions they can take and giving you a specific date in which some payment must be made. In some cases even making part of the payments will keep the [spin]lender|bank[spin] from possessing your property until you can bring all the payments up to date.

Properties reclaimed by these institutions are sometimes sold at auctions, other times they are listed privately. Since the banks main priority is getting the money that is outstanding on the loan, these foreclosed properties are often sold at less than the actual market value.

Sometimes your only hope in these cases is to talk to your lender, especially if your circumstance is a temporary one. Maybe arrangements can be made to allow you the time you need to raise the money and get out of default.

Foreclosure property is not limited to just homes and houses. It may be that you have borrowed money to purchase a piece of land and now, due to unforeseen circumstances are to pay back the loan. In such a circumstance the above process will also apply and is known as land foreclosures.

And it's the same with timeshare foreclosure or, indeed, any property against which you have borrowed money and find yourself unable to honor the loan.