Types of Foreclosure Proceedings

Judicial Foreclosure. This type of foreclosure is allowed by all states and in some states judicial foreclosure is required. The way that is works is that the lender files suit with the judicial system, and the borrower receives a note in the mail demanding payment for the money owed on the mortgage. The borrower then has only 30 days to respond with a payment in order to avoid foreclosure (or work out an agreement with the lender). If a payment is not made after a certain time period, the mortgaged property then is sold through an auction to the highest bidder, carried out by a local court or sheriff's office.

Power of Sale. In many states, a power of sale foreclosure is allowed. This is also known as a statutory foreclosure. Power of sale is only allowed if the mortgage includes a power of sale clause. After a homeowner has defaulted on mortgage payments, the lender sends out notices demanding payments on the debt. Once an established waiting period has passed, the mortgage company rather, than local courts or sheriff's office carries out a public auction. Non-judicial foreclosure auctions are often more expedient, though they may be subject to judicial review to ensure the legality of the proceedings.

Strict Foreclosure
. A small number of states allow this type of foreclosure. In strict foreclosure proceedings, the lender files a lawsuit on homeowner that has defaulted. If the borrower cannot pay the mortgage within a specific timeline ordered by the court, the property goes directly back to the mortgage holder. Generally, strict foreclosures take place only when the debt amount is greater than the value of the property.

Foreclosure: The Foreclosure Proceedings