What happens if my home is foreclosed?

Over the past five or so years Americans have had to become familiar with terms that we had never heard before.  We became familiar with loan modifications, short sales, and negative equity in our homes. Millions stopped paying their home loans and defaulted. Eventually the mortgage lenders wanted their property back and started the process of foreclosure.

Foreclosure, if you don’t already know, is a public record. That means anyone interested can find out that you’ve lost a home to foreclosure. However, a foreclosure public record does not get reported to the credit reporting agencies. The public record inventory is limited, for now, to bankruptcies, judgments and tax liens.

That certainly doesn’t mean your credit reports are safe from foreclosure reporting. The lender that foreclosed on your loan can and does report the fact that a foreclosure process was started or completed to the credit reporting agencies. And yes, a foreclosure is considered a major delinquency and is one of the FICO “seven deadliest.”

For the homeowner the foreclosure can often lead to free housing for some period of time.  It’s been reported that mortgage lenders are taking considerable time before they have defaulted homeowners removed from their homes. This process is called eviction, and it’s not a pretty picture.

This is what it looks like when someone is evicted…not pictured are the two Dekalb County Marshalls sitting in their squad cars making sure the former homeowners didn’t cause any trouble for the crew emptying their belongings onto their driveway.  And yes, that’s rain.

Eviction

When you’ve been kicked out of your house the Marshall will likely post some sort of signage on the door notifying you and anyone else interested that re-entering the property is considered trespassing and is a criminal act. The sign will look something like this…

Eviction notice

Evictions are not reported to the credit reporting agencies but it doesn’t matter.  Your credit scores will already be cognizant of the foreclosure and any late payments that lead to the foreclosure. Those items remain on your credit reports for 7 years.

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JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.