What Is a Foreclosure Proceeding?
Foreclosure is a catch-all term for the process used by mortgage-holders to take mortgage property from borrowers who default on their mortgages, according to an overview of the process described by the Cornell University Law School. The procedures lenders use in this process are governed by state law.
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Process Type
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The primary distinction between foreclosure processes is whether they are considered judicial or nonjudicial. Judicial foreclosures occur through the lender filing a lawsuit in court. Nonjudicial foreclosures are an administrative process essentially composed of a number of notices that are recorded, mailed, published and/or posted. About half of all states require lenders to use a judicial foreclosure process. A handful require states to use a nonjudicial process, and the remaining states allow lenders to choose between the two types.
The Judicial Process
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Of the two foreclosure processes, the judicial process is the one with a formal proceeding in which all parties may participate. This is at the hearing, which is the central proceeding of a judicial foreclosure. This process begins with the lender filing a lawsuit against the borrower. The lender serves the borrower with a summons and complaint, which the borrower can answer or ignore. If he fails to respond, the lender will attempt to shorten the court proceedings and receive a summary judgment. If the borrower responds with what is referred to as an answer, a court hearing is scheduled. After one or more hearings the judge renders a decision about the foreclosure.
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The Nonjudicial Process
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Some states require lenders to send borrowers a pre-foreclosure notice, warning them they are in default and informing them of steps they can take to avoid foreclosure. In many states, the nonjudicial foreclosure process begins with the lender recording a notice of default with the county recorder.
How much and what kind of notice follows depends on state law; however, every state requires the lender or lender's representative to publish notice of the foreclosure sale in a local newspaper.
The Sale
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In all but a few states, both the judicial and nonjudicial foreclosure process result in sale of the foreclosed property at a foreclosure auction. In states like Connecticut, the judge can authorize a direct transfer of title to the lender instead of going through a sale when the property is worth less than the outstanding loan balance.
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References
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