| When a mortgage borrower misses enough | | | | the sale, the lender retains it. |
| payments, lenders start getting anxious about | | | | If the sale price doesn't cover the original loan, the |
| being paid. If the two parties can't reach a mutual | | | | lender can file for a deficiency judgment. This is |
| agreement to bring the loan current, the lender | | | | simply the amount that is still outstanding. The |
| has the right to initiate foreclosure procedures. | | | | former owner is liable and must pay the |
| Foreclosure involves some level of court action. | | | | deficiency back to the lender - a very ugly |
| The speed of the foreclosure will be influenced by | | | | prospect. |
| the court's involvement. There are three types of | | | | Strict Foreclosure |
| foreclosures available to lenders. Each deals with | | | | This is yet another court action and the oldest |
| the defaulted loan in a different matter. | | | | form. Here, the court issues a demand of |
| Judicial Foreclosure | | | | payment to the borrower, providing a deadline for |
| This involves court action because the lender sues | | | | the payment to be made. If the borrower does |
| the borrower for the defaulted loan. If the | | | | not meet the due date, the lender gets the |
| borrower loses the suit the court will elect a | | | | property free and clear. |
| representative to handle the auction process. | | | | The lender has no obligation to sell the property, |
| During the auction bidders are competing against | | | | thought it is likely they will to regain what was lost |
| the mortgage lender. | | | | from the original loan. Again, the borrower has no |
| If no one outbids the lender, that lender then | | | | say or input into the decision. |
| receives immediate possession of the property. | | | | Though, as mentioned above, strict foreclosure is |
| The sale price is used to pay off the loan. | | | | the oldest form of foreclosure, very few states |
| Unfortunately for the homeowner, he has no | | | | use it anymore. Vermont, New Hampshire and a |
| control during the process. | | | | few others do, but that's all. |
| Power of Sale | | | | Judicial and foreclosure by sale are the most |
| When foreclosure is approved by the court, the | | | | common approaches. All three involve court |
| lender gets immediate possession. The lender will | | | | intervention, just in various degrees. The |
| sell the house in an effort to make up for the | | | | borrower has very little control once the court is |
| money owed. If there is any profit made through | | | | involved. |