Types of Foreclosure

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There a few types of foreclosure throughout the United States, although two of which are used more commonly. Each foreclosure type has its own specific requirements. Here you will find the general guidelines for each type of foreclosure.

Judicial Foreclosures
The judicial foreclosure is the type of foreclosure experienced for most part in states that utilize the Mortgage Agreement as the security document for home loans. This foreclosure requires action by a court. A Mortgage Agreement foreclosure usually takes place by a court-decreed sale of the property at an auction. Proceeds from such judicial auction are primarily utilized to satisfy the main debt, or first mortgage. Surplus (remaining balance after debt payment) is paid to other lien-holders, such as second mortgagees and others with subordinate claims on the foreclosed home.

Non-Judicial Foreclosures
"Power of Sale" is part of the Deed of Trust; a shorter and less expensive process for the lenders. Power of Sale grants lenders the ability to sell the property without any intervention from the courts. After proper notices have been sent out and recorded, the subject property is sold at a trustee's sale and the proceeds are utilized to pay off the loan.  Such non-judicial sales are sometimes available (in some states) even if the security document is a Mortgage Agreement.

Other Types of Foreclsoures
Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor  (home owner) defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in New Hampshire and Vermont.

Related Links:

Foreclosure Law: Here is a list of the US states and their respective foreclosure laws and regulations.