Wikipedia.com defines foreclosure as the legal proceeding in which a bank or other secured creditor sells or repossesses “real property” due to the owner’s failure to comply with an agreement. This failure to comply has to do with the mortgage payments. Usually, the mortgage lender will issue a Notice of Foreclosure if the client fails at least three times to submit any payment.
What are the types of foreclosures? In the US, there are several types of home foreclosures. One of the most common types of foreclosure is called judicial sale. Most lenders prefer this method when foreclosing a home property. As the name suggests, the home property will be put on sale under the supervision of the State’s legal court. The court sees to it that all parties involved in this mortgage are consulted and are in agreement with the terms of sale. The proceeds of the property will be used to pay off amount of debt the borrower has defaulted and the rest will go to the lien holders and lastly, to the borrower.
Another popular type of foreclosure is called foreclosure by power of sale or non-judicial sale. When it comes to the distribution of the sale, this type of foreclosure works much like a judicial sale. However, in this case, the lender will be handling the sale of the foreclosed property on its own, without the court’s supervision. Because there’s no need to undergo a court trial, foreclosure by power of sale is less complicated and easier. Both the judicial sale and foreclosure by power of sale are methods accepted in all states.
Other types of Foreclosure
Meanwhile, other types of foreclosure are accepted only in selected states. For example, strict foreclosure is only accepted in New Hampshire and Vermont. With a strict foreclosure, the borrower will be given a chance to pay his mortgage. If he fails to do so, the lender will automatically repossess the property without any obligation to sell.
Another type of foreclosure is acceleration. With this method, the mortgage lender has the right to demand payment from his borrower who has defaulted. This clause is accepted on all states by it is not imposed by the state or is not statutory. Thus, if this clause is not included in the mortgage agreement, your lender will have to wait on the actual foreclosure of the property.
Generally, the procedures that are done to settle a foreclosed property take time. Consequently, to avoid such time-consuming and complicated measures, mortgage lenders are willing to make arrangements on behalf of the borrower. If you are the home owner facing foreclosure, you have the option to avoid complete foreclosure if you choose to act during the pre-foreclosure phase or right after your lender issues a notice of default.
Therefore, it is a wise move on your part if you talk to your lender right away regarding the possible options you have to repay your debts and re-gain ownership to your property. Explain your current financial situation and let your lender know that you are willing to cooperate to avoid foreclosure. If your lender sees your sincerity and the weight of your financial difficulties, there is a great chance that you’ll get new payment terms on your mortgage.