The Different Types of Foreclosure

Foreclosure is a collective term used to address a process wherein the borrower defaults and the lender repossess the house and sells it to recover losses. However, there is more to that process than what most of us know. This is why it is essential that homeowners are properly educated. There are different types of foreclosure. Knowing them allows a homeowner to deal with notices of default properly.

Here are the different types of foreclosure:

Deed in lieu of foreclosure:

If you want to avoid foreclosure, you can opt for deed in lieu of foreclosure. This is done by giving the rights of the property to the lender. The lender will now have the opportunity to sell the property. You will still lose your home, but the foreclosure will not be recorded in your credit. This can give you a good start. However, you still have to ask your lender about how this will be reported. You can negotiate this though.

The question is, when would you consider such? Well, it is great deal of consideration t have deed in lieu of foreclosure if you have defaulted and you do not have or could not raise the needed amount to pay off your obligation. This is a good option when you cannot find any way to save your property. This is also a good idea if you have plans of purchasing a property in the near future.

Strict Foreclosure:

Strict foreclosure happens when a borrower defaults. The lender then sends a notice of default. If it is ignored, then he will file a lawsuit. The court will study the complaint. When it finds merit to the complaint, the court will order the borrower to pay the debt at a given timeframe. If the borrower fails to pay his dues, the property will be granted to the lender. He will then have the authority to sell it to recover losses.

Judicial foreclosure:

As the name suggest, a judicial foreclosure involves a lawsuit. The lawsuit will be filed by the lender once the borrower ignores or did not make the necessary action to address the notice of default from the lender. A record will be filed notifying interested homebuyers that the property they want to purchase has a pending case. If the court sides with the lender, the property will be sold at an auction and the proceeds will be used to cover the losses due to the default.

Statutory or non-judicial foreclosure:

Unlike the judicial foreclosure, this type of foreclosure does not include a lawsuit. The process is almost similar though. There will be a notice of default, if this is not corrected, the lender will take the property and sell it in an auction. However, the mortgage contract must specify that the lender will have authority to do so once the borrower defaults.

Although there are different types of foreclosure, it ultimately leads to a homeowner losing his home. This can be heartbreaking, which is why it is important that you avoid them as much as possible. Know the types of foreclosure is a start. If you are faced with one, make sure that you deal with the issue properly. If you cannot handle it yourself, consult a lawyer.

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