USAinDebt

A Foreclosure is a process in which the lender is allowed to sell the securing property to recover costs for a defaulted loan. In English, if you are not paying your mortgage, under certain circumstances your lender can sell your house in order to receive their money.

There are two types of Foreclosures - A Judicial and a Non-Judicial Foreclosure.

A Judicial Foreclosure results from a court action - there is no power of sale clause, and the lender has to sue the borrower to recover the unpaid balance. If the court finds the debt legitimate, and in default, it will issue a judgment for the total sum, including process expenses. Subsequently to that the court will order a public auction. The highest bid wins and the top bidder becomes the possessor of the property. Judicial Foreclosure is available in all states. <!–adsense–>

Non-Judicial Foreclosures are settled outside the court and are subject to state laws. The process is started by the lender, who sends out a Default Letter to the borrower. A NOD (Notice of Default) is sent to all parties entitled to its receipt, usually 3 months after the loan default date. If the borrower is unable to cover the amount owed, a Notice of Sale is publicly distributed. After the legally obligatory time period has expired, a public auction is held, with the highest bidder becoming the possessor of the property. Not available in all states, time-frames and procedures do differ from state to state.

The proceeds of the Foreclosure are used to recover the lender’s investment, including process expenses.