The act of foreclosure is the repossession of a property by a lender when a debt on the property has fallen behind in the repayment process. The property has been used as a security for a mortgage loan of equal value. The lender is usually a bank or a mortgage company that has provided the finds for the mortgage loan. Through foreclosure, the lender attempts to recoup some of the money that they have the potential to lose.
What is Foreclosure?
When the owner of a property fails to keep his agreement with the lender by making timely repayment; then the lender is legally entitled to repossess or sell the property.
The borrower should make it a point to know all the terms and conditions of the loan such as how much the payment is, the frequency of payments (some can be set up bi-weekly or twice monthly, the date that the payments have to be made.
Types of Foreclosure
Judicial sale is one type of foreclosure. In judicial foreclosure, the sale of the property will be under supervision of the court and the court will be responsible for the distribution of the proceeds from the sale. All parties involved will be the first notified of the sale.
Usually in this type of sale the funds are used first to settle the terms of the loan, then if any other liens or parties are involved, they are paid next, and finally any remaining funds due to the mortgager are paid.
Foreclosure by the power of sale is the second type of foreclosure and is the most popular. This type of sale is not under the jurisdiction of the court, and is totally under the control of the mortgage lender. The bank or lender sells the property and the proceeds are distributed first to the terms of the loan and then to the mortgager.
The third form of foreclosure is called strict foreclosure and is the least popular method in practice. The court informs the mortgagor to pay the loan within a specified amount of time; if he fails to do so the property and the title is returned to the lender with no obligation to sell. This type of foreclosure is not popular because it does not allow the lender any room to regain his investment back.
By learning about the different terms associated with foreclosure, the consumer is better able to focus efforts on stopping the foreclosure and thereby saving his or her home and preventing damage to their credit.
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