What Is Mortgage Foreclosure?
Mortgage foreclosure is the legal process by which mortgage lenders take possession of real property when terms of a mortgage loan have been breached. The most common cause of foreclosure is failure to make payments.
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Mortgage Documents
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Foreclosure is a legal process based on the type of mortgage documents used in each case. Some states require judicial foreclosure through the courts, while other states allow for sale of the property through "power of sale," also called non-judicial foreclosure. A few states provide for either type of foreclosure according to the type of mortgage documents used.
How Long
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Foreclosure may take a few months or more than a year depending on the legal proceedings required by state law. Court schedules, backlogs and legal actions including bankruptcy can also affect how long it takes to foreclose a mortgage loan.
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Homeowner Rights
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Foreclosure laws require proper notification of homeowners and others with a vested interest in the property securing the mortgage that's being foreclosed. Notices may be mailed, posted on the property and published according to state law.
Sale or Auction
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Foreclosure is completed when a public auction or Trustee's sale is held. Title to the property is awarded to the highest bidder, or to the mortgage lender if no one bids at the sale.
Redemption
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Some states provide for redemption of the property by the homeowner after the foreclosure sale is held. This typically requires payment in full of the mortgage balance, accrued interest, and legal fees and costs advanced by the lender.
Deficiency Judgment
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Depending on state law, a lender may sue homeowners for losses if the foreclosure sale yields less than the amount needed to pay off the mortgage loan and legal costs. This is most likely to occur in cases involving investor owned properties.
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