The Basics of Foreclosure
By Maximus Mejo

Foreclosure is the lawful process of the mortgage holder taking the collateral for a promissory note in default. The procedure is somewhat different from state to state, but there are essentially two types of foreclosure, judicial and also non-judicial. In mortgage states, judicial foreclosure is used, whereas in deed of trust states, non-judicial foreclosure is used. Most states allow both types of proceedings, but it is ordinary practice in most states to use wholly one method or the other.

Judicial Foreclosure
Judicial foreclosure is a court case that the lender ("mortgagee") brings against the borrower ("mortgagor") to obtain the property. About half of the states use judicial foreclosure. Like all lawsuits, it starts with a directive and complaint served upon the borrower and any other party with inferior rights in the property.

If the borrower does not file a reply to the lawsuit, the lender obtains a judgment by default. A referee is then selected by the court to compute the total amount (including interest and the attorney's fees) that is due. The lender then should promote a notice of sale in the newspaper for four to six weeks. If the total amount owing is not paid, a public sale is conducted by the arbitrator on the courthouse steps. The entire process could take as little as three months and to the extent those twelve months depending on the volume of court cases in your county.

Non-Judicial Foreclosure
Most states allow a lender to foreclose without a court case, using what is usually called a "power of sale." pretty than a mortgage; the borrower ("grantor") provides a "deed of trust" to a trustee to hold for the lender ("beneficiary"). Upon evasion, the lender just files a notice of default and a notice of sale that is published in the newspaper. The entire procedure regularly takes about 90 days. The borrower typically has a right of redemption after the sale.

Strict Foreclosure
A few states permit "strict" foreclosure, which does not require a sale. When the proceeding is started, the borrower has a certain amount of time to pay what is owed. Once the date has passed, title reverts to the lender. Many California and Oregon cases, in which the seller has sought forfeiture under a land contract, the court has ordered strict foreclosure.

Salvation Rights
Some states provide a borrower the right to "redeem" the amount payable and get title to the property back after the sale. The length of the salvation period changes from state to state. The uppermost right of redemption is from the proprietor, borrower or guarantor on note. Behind him come the junior lien holders who are in danger of being wiped out by the foreclosing senior lien holder.

In states where there is long salvation period, investor frequently purchase the junior liens on the property to have the right to redeem the property from foreclosure. The holder of the mainly junior lien has the last right to redeem the property by paying off all fundamental liens. The owner, of course, has the highest right. Obtaining a quitclaim action from the proprietor gives you the right to redeem the property yourself.