Pre-foreclosure happens before a property is repossessed by the lender and takes place when a homeowner fails to make their mortgage payments for a certain number of times. Once the homeowner is late on the agreed upon payments, the lender will then issue a notice of default and the home will enter pre-foreclosure.

Since the house is still owned by the borrower at this point, mortgage borrowers may still have some options to take action and save their homes. For instance, borrowers may attempt to sell the property before the foreclosure sale. This process is referred to as a “short sale” and generally the lender will agree to the sale if market prices and current appraisals have dropped since the purchase of the home.

Another option is for the homeowner to consider a loan modification which would involve the lender resetting the loan terms and cutting the interest rate as well as extending the loan term. This would allow the borrower to make smaller payments over a longer period of time, effectively catching up on the mortgage payment while paying less in the long run.

Finally, the lender will have to go through a court proceeding in order to finalize a foreclosure and eviction. During this time, lenders may be willing to let homeowners make back payments to get out of pre-foreclosure and even waive penalty fees. Some lenders will accept a loan renegotiation or restructuring,, thus providing greater financial flexibility for the borrowers.

In summary, pre-foreclosure is a process whereby lenders initiate a foreclosure before repossessing the property. Once a homeowner defaults on their mortgage payments, they can still take some action and attempt to save their homes. The homeowner may opt for a short sale, loan modification or make back payments in order to avoid an eviction. Since each lender may have different processes, it is important for the borrowers to understand their options and try to explore any possible option before it's too late.