If home owners fail to make monthly mortgage payments ?

The lending bank(s) is forced to take a legal action namely foreclosure.  Before the lending bank(s) takes a legal action - a sheriff sale, the home owners can voluntarily initiate the selling process of their house. For many cases the sales price of such house is lower than the amount home owners owe to the lending bank hence the name short sale. If the house fails to sell within a given period then the lending bank has to sell the house through a sheriff sale. If failed, the bank takes the possession of the house. Such houses are called REO (Real Estate Owned).