According to the FDIC, about 250,000 new families enter into foreclosure every three months. There are different types of foreclosure in the US real estate industry. In a nutshell, foreclosure is losing your home prematurely due to debt.
The flipside of the American homeownership dream is foreclosure. Some people who manage to acquire homes don’t live to the expectation as things fall apart. It’s a nightmare that comes with devastating effects that many homeowners don’t anticipate.
Many families suffer much after losing homes. The horror stories of victims of foreclosure cannot be underestimated or taken lightly. This article discusses the types of foreclosure that many Americans experience. Read on!
1. Judicial Foreclosure
This is the most popular type of foreclosure in the country. Lenders exploit legal processes when repossessing homes from homeowners. In the event of default, the lender files a lawsuit against the borrower.
The whole process happens through the court, and it’s the jury who rules on the foreclosure. After the lawsuit is filed, the borrower is notified or served with court papers. The jury gives time to pay their debts according to the law.
If the mortgagor fails to honor the debt within the specified timeframe, the property enters into an auction. Judicial foreclosure is the safest way to minimize future legal proceedings.
Lenders incur lawsuit expenses while the process takes a little bit longer. Being sued and having a notice on the property is very demoralizing to homeowners.
2. Non-Judicial Foreclosure
In this process, you don’t have to undergo a lawsuit. It applies best when your mortgage has a power of sale. The lender puts the property on public auction without court involvement. The borrower is presented with a chance to redeem themselves and keep the property.
In the case of a non-judicial foreclosure, a formal notification for payment of debt is made. However, the timeframe allowed for repayment of debt is usually shorter in the judicial process. This is the most advantageous process for lenders as it’s inexpensive and doesn’t take long.
Non-judicial foreclosure applies in states where mortgages are deeds of trust such as Texas and California. The mortgage owners and lien holders can claim the proceeds after the sale.
3. Strict Foreclosure
This is not popular in the US except in states such as Vermont, New Hampshire, and Connecticut. Under this type of foreclosure, the lender seeks a court order to seize the property after default. When the order is approved, the homeowner is given time to settle the debt before the home is seized.
If the homeowner can’t pay the debt, the property goes to the lender who decides the action to take.
Find an Attorney During These Types of Foreclosure
Are you about to enter into foreclosure? Selecting an attorney to assist you before it’s too late is helpful. With an attorney, you can make more informed decisions to avoid losing it all. The property attorney will assess the situation and advise you on the best action to take. An attorney can help in negotiating deals with the lender to avoid foreclosure. Also, they can help in seeking other means such as refinancing or bankruptcy.