What is Foreclosure?
Foreclosure is a legal process where a bank or mortgage lender forces the sale of a property to help repay a loan that is in default. In most cases the lender obtains a court ordered termination, and the property is listed to be sold at an auction or the mortgage lender finds someone who is able to purchase and make payments on the home.
Types of foreclosure:
There are different types of foreclosures that exist, however some types of foreclosures only apply to certain states.Foreclosure by judicial sale
Foreclosure by judicial sale, sometimes referred to Judicial Foreclosure, is a type of foreclosure that is available in every state. In this case, the mortgage lender will take the borrower to court, and when the property is sold, the proceeds will first be used to pay the balance on the mortgage, then any liens on the property, and any remaining proceeds will go the borrower. The court hearing is usually held in a state or local court, however in some cases hearings are held in a Federal court.Foreclosure by power of sale Foreclosure by power of sale, often referred to as power of sale, is available in many states. It is only allowed if a Deed of trust was used or the mortgage included a power of sale clause. It involves the sale of the property without any court authority. The property is generally sold at an auction, and just like a Judicial Foreclosure, proceeds will first go towards the balance on the mortgage, then to any liens that exists and proceeds remaining will go the borrower.
Strict foreclosure by judicial sale Strict Foreclosure, is only available in a few states, which include Connecticut, New Hampshire and Vermont. It grants the mortgage lender the right to sale the property based on the delinquency of the loan. If the mortgage lender issues a law suit against the borrower, the court sets a specific date that the borrower must pay the mortgage. If the mortgage is not paid by that date, the mortgage lender will receive the title to the property. This type of foreclosure usually comes into play when the appraised value of the property is less than the balance of the loan.