Liens That Can Trigger a Foreclosure
Foreclosure is a state law proceeding that allows a creditor to sell a debtor's property to raise money to pay off the debt owed to that creditor. Private parties, called trustees, can carry out some types of foreclosures, while sheriffs' departments carry out other types of foreclosures. Foreclosure, whether by private party or sheriff, can be performed under several different types of liens.
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State Law Remedy
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Because foreclosure is a state law remedy you can only foreclose under the liens for which state law specifically authorizes foreclosure. Each state has a collection of statutory laws, collectively called the State Code, that will identify the various liens that can trigger a foreclosure action.
Mortgage Lien
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The most common type of foreclosure is triggered by a mortgage lien. A mortgage lien gives the mortgage lender a lien on a specific piece of real estate. The lender can only foreclose on the specific property that is identified as collateral in the mortgage documents. The county sheriff's department carries out mortgage foreclosures. Foreclosure on a mortgage lien can only take place after the borrower defaults and the lender obtains a judgment from a court ordering the sheriff's department to hold the foreclosure sale.
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Trust Deed Lien
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Similar to a mortgage lien is a trust deed lien. The key difference between a trust deed lien and a mortgage lien is that an independent third party called a trustee can carry out a private foreclosure, called a power of sale foreclosure, under the trust deed. In other words, the lender does not have to involve either the court system or the sheriff's department. Like a mortgage lien, a trust deed lien can only be foreclosed on after default occurs.
Mechanic's Lien
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Another type of lien that state law authorizes foreclosure on is a mechanic's lien. A mechanic's lien attaches to any property that a contractor, subcontractor or materials supplier works on or supplies materials to. Foreclosure on a mechanic's lien requires a procedure similar to foreclosure on a mortgage lien.
Judgment Lien
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A final type of lien that can trigger foreclosure is a judgment lien. A judgment lien can arise from any type of court judgment, regardless of whether that judgment is based on a real estate dispute. So, if you default on a credit card and the credit card company obtains a judgment against you, that company can then enforce the judgment lien by foreclosing in a manner similar to mortgage foreclosure.
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References
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