Home Foreclosure in a Nutshell
It is a common term these days due to the rise of home foreclosure incidence. But what really is foreclosure? How does it happen? And what are the types of foreclosures?
For most people, buying a house or a property requires them the financing of a lender. This is due in part of the large sum of money that should be invested, which in most cases is not available. This money lent should be paid back according to the terms and conditions agreed between the mortgage lender and the buyer. However, for some reasons the borrower could fail to attend to his financial obligations and may miss his mortgage payments which are then called “default”. When this occurs, the lender will either sell his house or repossess the property in order to compensate for the missed mortgage payments.
But, delayed mortgage payments will be given a three-month allowance to give time for the borrower to fix his accounts. This time allowance could be used by the lender though for starting with the foreclosure proceedings.
Types of Home Foreclosure
Judicial Foreclosure
This commences by issuing a lawsuit by the lender against the homeowner. If the homeowner fails to respond to the lawsuit, the lender will win the case and he will then be given the title of the house which could be sold or auctioned to the investing public.
An official from the court will preside over the auction. The mortgage lender should place his bid along with other interested bidders. The one with the highest bid will be given the title and the proceeds of the auction will go to the mortgage lender to pay off the whole debt.
Non-Judicial Foreclosure
This type of home foreclosure is accomplished without a lawsuit. This begins with an issue of the mortgage default by the lender towards the homeowner plus the intent to auction or sell the property. The homeowner is then given the prerogative to stop the process by coming up with an agreement with the lender or by paying the mortgage default.
The agreement could include a plan to repay the mortgage, or to be given the option to delay all payments, or other conditions that are usually time-bound.
Strict Foreclosure
This is foreclosure without sale. Instead, the title of the house will go straight to the mortgage lender. The lender usually has real property agents or brokers who sell foreclosed houses. The proceeds of the sale will be used to pay off the mortgage default. However, in case of a deficiency judgment (say the selling price of the house is $120, 000 and the actual balance is $150, 000) the homeowner will still be liable with the remaining balance.
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