Foreclosure is the process by which a lender of a mortgage, hereafter referred as the mortgagee secures the legal authority by either a court injunction or law operation to end the rights of a borrower, hereafter referred as the mortgagor with regard to a mortgage loan. Under normal circumstances, the mortgagee obtains interest of guarantee or security from a mortgagor who puts up real property, in this case a house to facilitate the acquisition of the loan. Under the pre-contract terms, if the borrower by any means deviates or fails to honor the terms and the lender attempts to re-acquire the property, equity court can intervene and grant the borrower the right to redeem their property on condition that they’ll pay the standing debts within a specified period.
In most cases, the breach of the mortgage is an alteration in payment of some paperwork gotten by a mortgagee on the same property. On completion of the foreclosure process, the lender can sell the property and use the funds to compensate mortgage along with other operating costs and expenses incurred during legal proceedings. The contract terms clearly stipulate that if the sale of the property does not yield enough funds to stand cover for principal and other rates, the mortgagee has the right to file for what is known as judgment of deficiency.
A mortgagee can start the foreclosure process at a time pre-indicated in the paperwork, after what they consider a breach has been sanctioned. There are two commonly applied types of foreclosure; foreclosure by judicial sale, and foreclosure by sale power. There are other types applicable in many other states but these two are popular in the United States.
Judicial sale. This system requires that a court adjudicates the sale of the property under mortgage, with the outcome prioritizing the mortgage principal, then the lender’s costs and if there will be any remnants then the borrower may be considered. Judicial foreclosure is characterized by the mortgagee filing a lawsuit versus the mortgagor. All key players have the right to be served with information of the imminent foreclosure with the ultimate ruling being announced after both parties have pleaded their respective cases in court.
Sale power or nonjudicial foreclosure. It is the system whereby the mortgagee can proceed with sale of property without the supervision of a court. It is normally determined by a clause in the pre-contract agreement where a deed of trust other than a tangible mortgage was provided. The advantage of this type of foreclosure is that it is fast and cheap compared to the other foreclosure by judicial sale. Just like the other system, the proceedings from the sale of property are first meant for the mortgagee and any other auxiliaries