Foreclosure is a legal process taken by the creditors, such as mortgagee, bank institutions, money lenders or in other words, the one who lent or gave you the money to buy your home property or assets at the first place. When you didn’t pay your installment according to the term and condition of the mortgage agreement, the creditors have the right to take legal action to terminate your ownership on the property covered in the mortgage. They will then auction off your property and the proceeds will be taken to recover their money. If the foreclosure sale didn’t generate enough money to cover your mortgage loan in full, you might be facing another legal action which is a deficiency judgment put against you if the mortgage agreement clearly stated that they have the right to do it in case of insufficient foreclosed sale. This will seriously affect your credit rating and the ability to qualify for a loan in the future.
The creditors usually will file for a court action to foreclose your mortgage property within a specific time period after a default payment occurs in accordance to the mortgage agreement. For example, if you failed to make the installment for months. Commonly, the creditors can take action by judicial foreclosure or foreclosure by power of sale. In some minor case, the strict foreclosure action also can be taken to settle the mortgage dispute.
Judicial foreclosure is a condition where an appointed court will be supervising the foreclose sale of the mortgaged property, the proceeds of the sale will first be given to the mortgagee and other lenders to recover their investment. Finally, if there is money left from the sale after deducting the cost and mortgage payment, it will be given back to the borrower or mortgagor.
Foreclosure by power of sale is a condition where the creditors or mortgage holder will auction off the mortgaged property without the supervision of a court. This type of foreclosure is much more convenient between the creditors and borrowers without the intervention of a court. The priority of proceeds from the property sale is as same as judicial foreclosure.
Strict foreclosure is a less use foreclosure method because of its limited availability. This minor case is when the creditors or mortgagee filed a suit against the borrowers or mortgagor when there is a mortgage dispute occurs. If it approve, the court will instructs the defaulter to pay the mortgage accordingly within a specified time. If the borrowers or mortgagor fail to comply with the court order, the creditors or mortgagee will gain full ownership of the mortgaged property without the obligation to sale it. Usually, this type of foreclosure is taken when the market value of the mortgaged property is less than the mortgagor debt.
