As a result of the recent collapse of the real estate market, the word “foreclosure” has unfortunately become an often used word in the English language. This article contains information about types of foreclosures and how the process works.

As we know it today, foreclosure is the process by which a homeowner will lose his or her home to their lender. Just like the repossession of a car or furniture when the borrower does not pay, foreclosure allows the real property lender to take back the property if the homeowner falls behind on his or her payments.

The bank that made the loan to you for your house can do this because as part of its agreement to loan money to the borrower, the lender is granted a lien by the homeowner which the bank can enforce should the homeowner refuse or be unable to pay.

The most common form of foreclosure in the United States is known as a “non – judicial” foreclosure under the provisions of the power of sale clause contained in a mortgage or deed of trust. This method has become the most frequent type of foreclosure proceeding because unlike a “judicial” foreclosure no court action or judicial proceeding is required. In California, for example, virtually every foreclosure is a “non – judicial” foreclosure because it takes very little time and money to take back the property from the borrower.

A “non – judicial” foreclosure process involves the sale by the mortgage holder without court supervision. This process is fastest and cheapest way for the lender to terminate the rights of the homeowner and in some states can take less than six months.

A” non – judicial” foreclosure culminates in a trustee’s sale. At the trustee’s sale the real estate will be auctioned to the highest bidder. Should bids not be forthcoming the property will revert to the lender whose loan is in default. If there are bidders, the foreclosing bank can keep the proceeds pay off its loan and any legal costs. Amounts in excess of the lender’s loan will be used to pay off junior or subordinate liens. Should there be a balance after the payment of all liens it will be paid over to the borrower.

“Judicial foreclosure,” is available in every state and required by some. This involves a lawsuit in which the bank asks for a sale of the real property under the supervision of a court. As with other court actions, “due process” permits the borrower to answer the suit and raise legal defenses. Ultimately a decision is made by the court in favor of either the lender or borrower. Should the lender prevail, the property is sold with the proceeds going to satisfy the foreclosing lender; other lien holders; and, finally, if there are any proceeds left, the homeowner.

Additional information about foreclosure can be found by consulting a real estate attorney in your area or logging on to the website of attorney Mitchell Reed Sussman at

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