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Foreclosure and repossession: How are they different?

If you're at the point where you can't keep up with your mortgage payments and are looking at the possibility of losing your home, you're going to be exposed to a number of terms you probably hadn't thought much about before -- or even heard. Two key ones are foreclosure and repossession. Many people use these interchangeably, and they both involve a home being taken by a creditor. However, they are two different legal processes.

As one real estate expert explains, "Foreclosure refers to the process that your lender must follow if you go into default on your home loan and stop making payments." The length of time a home remains in foreclosure varies by state.

New Jersey has one of the longest average foreclosure periods in the country, at 3.5 years. The national average is 1.7 years. The upside to that is that families can remain in their homes longer, since creditors don't require that you vacate as soon as the foreclosure process begins.

New Jersey's overall foreclosure rate dropped in the past year. However, seven New Jersey counties had the unfortunate distinction of having the highest rates in the country in 2017.

Creditors generally don't begin foreclosure proceedings until a borrower is behind on payments by at least 120 days. Lenders lose money if they have to foreclose Therefore, it's usually to their benefit to work with homeowners to work out some type of payment arrangement -- particularly that if they can show a legitimate hardship issue.

If the foreclosure proceeds, repossession is what happens at the end. That's when the lender takes possession of the home and the family has to move out. Residents are given a date by which they need to vacate. While New Jersey's rate of foreclosures dropped last year, the rate of repossessions was higher than it had been in over a decade.

If you are having difficulty making your mortgage payments, it's best to take action sooner rather than later. This can show your lender that you're in good faith and taking responsibility for your debt. An experienced New Jersey bankruptcy attorney can help you explore your options.

Source: Realtor.com, "What Is the Difference Between Housing Repossession and Foreclosure?," Audrey Ference, accessed Jan. 24, 2018

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