Types Of Foreclosure
There are several different types of foreclosure proceedings, each with their own peculiarities. Many people are understandably confused when it comes to making sense of them all.
Deed In Lieu Of Foreclosure
This is a way of avoiding an actual foreclosure. The borrower agrees to hand over the property deed to the lender as full repayment of any outstanding debt against the property. It is quick and avoids having a foreclosure recorded against your credit history, but you lose any equity you have built up in the property. Read more about the deed in lieu of foreclosure process.
Judicial Foreclosure
This occurs when other avenues of repaying the debt cannot be found. The matter goes to court and an officer of the court sells the property to repay the debt. It can be a long drawn-out process and often results in a lower sale price than the property might otherwise attract, but you will receive whatever is left of the proceeds once costs, legals and the debt balance have been paid. Read more about the judicial foreclosure process.
Statutory or Non-Judicial Foreclosure
Similar to a judicial foreclosure, but the property is sold by the lender without the involvement of the court. This can only be done when the loan contract allows for it. The process will be faster than a judicial foreclosure, but otherwise has similar benefits and drawbacks. Read more about the statutory foreclosure process.
Strict Foreclosure
The lender takes possession of the property immediately upon any breach of the mortgage agreement. This can only be done if the original loan contract allows for it. It is similar to a Deed In Lieu Of Foreclosure, except the borrower has no say in the matter. It is quick, but is obviously weighted very heavily in the favor of the lender. Strict foreclosure is very rare nowadays. Read more about the strict foreclosure process.