The Different Types Of Foreclosures

[Jun 24, 2008.]

 

The issue of foreclosure has certainly taken center stage in the media and with just reason. People want to know about the state of the housing market and the economy as a whole and a good indicator of this are the amount of foreclosures.

For those that are now aware, the sub prime mortgage market collapsed and forced countless home owners into foreclosure. Foreclosure is when the home owner can no longer make mortgage payments and the bank seizes the property with hopes of selling it to recover their losses. The amount of foreclosures has caused an increase of homes on the market with no buyers. This has resulted in a crisis that has reached all areas of the economy. With no end in sight for the immediate future, home owners are taking preventive measures to insure that they can remain in their homes.

One of the first of these preventive measures is education. Home owners who understand mortgages and the foreclosure process along with any options open to them will be better able to defend against any negative circumstances that may arise.

Now the amounts of information available on foreclosures take up volumes of legal documents so it might be difficult to find what you should know. Your lender will be able to better direct you to what you should familiarize yourself with.

Like most home owners, you may not be aware of the fact that there are actually two types of foreclosures. For the most part, foreclosure is used as a generic term since the end result is the same; the loss of your home due to defaulting on mortgage payments. However, the processes do differ.

The two different types of foreclosures are; foreclosure by sale and strict foreclosure.

The beginning step of each type of foreclosure is the same. The defaulting payment triggers the bank to begin the foreclosure process. If you are still unable to make the mortgage the foreclosure is taken to court. It is the judge who decides which type of foreclosure is used.

Foreclosure By Sale

During this type of foreclosure, the judge overseeing the case decides upon a day of sale. The day of sale is the day of the auction. The home owner still has a chance to make the mortgage payment; at this point the entire mortgage payment will be needed, before the day of sale. However, when that day comes you lose all right to the property.

When the sale is made the money will go to the cost of the auction. Afterwards, the lender receives their part and if there is anything left you will get whatever is left.

Strict Foreclosure

Strict Foreclosure is generally used when there is very little equity in the home.  The judge will assign you “law days”. These “law days” act like a deadline which gives you a set amount of time to make the mortgage payment. The length of the “law days” varies state to state and situation to situation. After the time allotted the bank will receive the title should no one make the payment.

If you fear that you may be at risk of foreclosure then make sure to research your options and how such an act will affect you and your home.