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The Different Types of Foreclosure


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Home foreclosures are a regular occurrence. It usually starts off with the loss of a job, financial problems, a sick family member or any other sort of problem which impacts on a homeowner financially and keeps them behind on their mortgage and home payments. A lot of lenders have the legal power to foreclose on a property with even a single missed payment, however most wait for a long period of time before they launch foreclosure measures.

When a homeowner fails to make their mortgage payment on time (if at all), the mortgage holder or lender has the legal right to take possession of this property and sell it for the amount due. This is called foreclosure.

Different kinds of foreclosure exist and usually you may be faced with any one of the following depending on a number of circumstances which include the type of loan you have and the state where the property in question is located:

Strict Foreclosure is the primary type of foreclosure and it was the first kind which was used by creditors. What it does is that it permits the lenders to repossess any property where the owner has fallen behind on mortgage payments. No extra requirements are needed to sell it or to give the borrower any extra funds which may be realized from its sell. This law is no longer valid in most states due to the unfair nature of allocating no rights to the borrower as per extra financial proceeds but states such as Connecticut, New Hampshire and Vermont all still permit strict foreclosure on properties located within their state boundaries.

Foreclosure by judicial sale is any means of foreclosure which is often considered as the most common and preferred kind of foreclosure which is permissible in all the states. What it requires is that both the lender and the borrower should appear before a judge in order to ascertain whether the property can be sold so as to pay off any mortgage balances or outstanding fees. As soon as a foreclosure has been approved by the court, the property is then auctioned off and the initial proceeds go to pay off the initial mortgage loan as well as any other lien holders. Excess funds at the end of all this are given to the mortgagor. Due to this fact and the fact that this procedure is completed under the supervision of the court, it is often considered the best kind of all foreclosures.

Foreclosure by power of sale has the disadvantage of having no judicial watchdog and it is a much faster way for creditors to sell off the property and regain any funds which they have lost. This kind of foreclosure is rather unfair to the current homeowner as no legal body looks over their interests.

In most states, as soon as a home has been foreclosed, the homeowner loses all rights to the said property. A few states however, may provide a redemption period of a varying range of time, in which a homeowner can repurchase their property even if it has been sold at an auction. Again, this depends on where you live.

Guy Starbuck is a health oriented financial guru who writes for , and .


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