All You Need to Know About the Foreclosure Procedure

A foreclosure procedure occurs when a borrower fails to comply with his or her mortgage. A borrower defaults on their mortgage when the deed of trust is violated through the payment of debt.If one of the terms of the mortgage is violated by a borrower, the lender can foreclose its mortgage in two ways –  a judicial sale or  a power sale.

A judicial sale is when a foreclosure procedure, which is the repossession of a property, is conducted under the supervision and authority of the court. First, when the debtor defaults on their mortgage, the lender must make an appeal to the court in order to gain their permission to sell the property. If he gets the permission of the court, a lawsuit against the borrower will be undertaken and the property in question will be put up for auction, which is also under the authority of the court. An officer of the court designated for that purpose then issues a deed to the winning bidder at the auction to confirn that the property is sold. Usually the lenders bid in the amount of the owed debt at the auction. The court, then, confirms the sale procedure and hears any case, if any, coming against.

A power sale is a type of non – judicial foreclosure procedure in which there is virtually no court involvement. The lender is authorized the right to sell the property. This is usually agreed upon by the two parties involved in the deed in lieu of foreclosure. The foreclosure procedure begins when the mortgage lender notifies the debtor that his mortgage has defaulted and his intention to sell the property at a public auction. At this stage, the borrower can solve the default or use other lawful means like filling for bankruptcy to stop the sale. If he fails, the lender will conduct a public auction at which the highest bidder will become the owner of the immovable property. The new owner will not bear any interest burden from the former owner. He, however, must clear any liens that are superior to the mortgage being foreclosed, such as unpaid property taxes. After the property has been sold, court involvement is compulsory. In such cases, the lender will seek a deficiency judgment from the court against the borrower. For instance, an eviction may be ordered to obtain possession of the property so that future clashes between the parties may be avoided.

In some cases, it may be necessary for the new owner to petition a court for issuing a decree to cut off any junior lien holder’s rights to redeem the senior debt. If he fails to turn up within a certain time frame, his right is cancelled and the new owner’s title is fixed. In either type of foreclosure procedure, the purpose is to protect the rights of all the parties.