Foreclosure Types

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What Are the Different Foreclosure Types?

Foreclosure can be a very intimidating process for most people. It’s not a good idea to enter into a mortgage agreement without fully understanding the different types of foreclosure. In general, there are two main types of foreclosure proceedings: Foreclosure by Judicial Sale, and Foreclosure by Power of Sale.

Foreclosure by judicial sale is a type of legal action where the mortgaged property is sold under the court’s supervision. This allows all parties to be notified of the foreclosure proceedings. The debtor is usually allowed participate in some proceedings, which are followed by a judicial decision. Only after the court decision is finalized can a sale of the property proceed. Foreclosure by judicial sale is available in all states, and is the preferred method for foreclosure in most jurisdictions.

Foreclosure by power of sale on the other hand occurs without court supervision. This can often lead to a much more efficient and quicker process for foreclosing on the property in question. Even though the court is not supervising the sale, all necessary parties should still be notified. Foreclosure by power of sale is not available in all states, although a majority of U.S. states allow this method. 

What Does “Strict Foreclosure” Mean?

Strict foreclosure is a specific type of foreclosure by judicial sale. In a strict foreclosure proceeding, the court orders the mortgagor to repay their mortgage debt within a specified time period. If the mortgagor (debtor) is unable to repay the debt, the mortgage holder is allowed to automatically gain title to the property. In addition, the mortgage holder has no obligation to sell the real estate in question. Strict foreclosure is only available in a limited number of jurisdictions, namely places located in New Hampshire and Vermont.

Where Do Mortgage Sale Proceeds Go To?

In any foreclosure, proceedings from the sale are distributed in a very specific way. First, sale proceeds go to the mortgage holder. After that, proceeds are distributed to any other lien holders as qualified. Lastly, any remaining proceeds (which are usually little or none) are distributed to the mortgagor. 

Do I Need a Lawyer for Help Understanding Foreclosure Types?

Real estate law can often be very complicated. This is especially true when dealing with issues like mortgages and foreclosures. If you need assistance with mortgage and foreclosure laws, you may wish to speak with a qualified real estate lawyer. Your attorney can help determine which course of action you can legally take. If you are facing foreclosure, your lawyer can help defend your interests, whether the proceedings take place with or without the court’s intervention. 

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Last Modified: 01-28-2014 12:05 PM PST

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