Foreclosure Facts: Important Things You Should Know

Foreclosure is what occurs when an immovable property gets repossessed by a bank or another lender who offered someone a loan to pay for the property and that person is no longer able to make payments on the loan.   In order to foreclose on a property, the lender needs to show that the borrower has somehow broken the terms of their loan agreement.  This becomes secure when a lien is placed on the property.  When the process is over with, the lender has foreclosed on a mortgage or a lien.

Various Kinds of Foreclosure

Once a mortgage payment has been defaulted on, the lending agency can begin the foreclosure process.  Two specific kinds of foreclosure occur most commonly in the United States, although individual states have additional kinds of foreclosure.  Applicable in all fifty states, the most commonly encountered form of foreclosure is foreclosure by judicial sale. 

The foreclosure by judicial sale means that the mortgaged property is sold under the courts supervision and the proceeds of the sale are first meant to wipe out the outstanding payments on the mortgage and then the remainder will be used to pay off other holders of liens, and the remaining portion would then go into the hands of the mortgagor.

Another form of foreclosure, foreclosure by power of sale, allows the mortgage holder to handle the sale of the home or property without any court involvement.  This tends to be a better option than foreclosure by judicial sale.  Most states allow for this type of foreclosure.

In these two examples of kinds of foreclosure, the earnings from the sale of the home or property are used in mostly the same manner.  Other foreclosures are available in certain states; the way they are conducted will depend on the state laws. 

There is also strict foreclosure process in which a mortgagor will default whereupon the court shall order the mortgagor to pay mortgage for a specified period of time and should the mortgagor still default; the holder of the mortgage gets the title to the property without being under any obligation to sell off the property.

This was the way that foreclosure proceedings were originally carried out in the United States.  Now, however, it is only applicable in three states: Connecticut, Vermont, and New Hampshire.