The process of foreclosure can be slow or it can be rapid. It completely depends on the state and the type of foreclosure that is being enforced. In the United States there are two basic types of foreclosures; a strict foreclosure or a deed in lieu of foreclosure gives rise to a deed that is an instrument declaring the lender to be the titleholder of the property. Such foreclosures are judicial in nature and require court orders and hearings in order to take effect.

• Another type of foreclosure is “power of sale” where the lender does not require the permission of the court to enforce eviction and foreclosure. In these types of foreclosures which are non judicial, the mortgagee or lender has the option of conducting a public auction. This is important from the lenders point of view since the mortgagor may try to stall the foreclosure by filing for bankruptcy or by using such other lawful means.
• Many states require a deed in lieu of foreclosure since the default in payment may be due to negative equity in the house. This means that the mortgage amount may be more than the real worth of the property where the real worth is expected to remain lower in the near future. In light of the recent U.S housing bubble and the sub-prime mortgage crisis many people opt not to pay anything since the prices of homes have fallen dramatically in the last three years making mortgages redundant.
• In a non judicial or “power by sale” type of foreclosure, the public auction takes place free and clear of any interest in the property by the previous owner. However any liens such as unpaid taxes may be passed on to the highest bidder at the auction. In such types of foreclosures just the auction may not be enough to seal off the contract. A legal eviction notice or directive may be required before possession of the property by the highest bidder.
• In many cases where judicial foreclosures are involved, the lenders have lost because they couldn’t prove their interest in the contract. This simply means that they could not prove that they were party to it and had any interest in it. Furthermore in one case the court ruled in favor of the mortgagor since the mortgagor claimed there was no lawful consideration in the contract. This is valid because for being a contract there must be a lawful consideration (payment/money), otherwise the contract is void ab Initio.
• In many states it is compulsory for the foreclosing lender to perform a title search which determines if the seller has any saleable interest in the property, what kind of restrictions or allowances pertain to the use of the property, and whether there are any existing liens on the property such as taxes or other unpaid expenses. The lender also has the legal obligation to inform any person/s who may have liens on the property so as to enable the lien holders to express their interest in the foreclosure litigation.
• Another point to note is that many times the court can put a deficiency judgment on the mortgagor. This happens when there is a difference in the real worth and the mortgage value. The latter is more and the former is less creating a deficiency which is payable by the mortgagor. In such cases the mortgagee may have the right to collect the deficiency out of the equity in other assets of the mortgagor or the assets of the mortgagor (if any). The exception to this case being the non-recourse debt in which the lenders recovery is only limited to the collateral and may not proceed any further.

If you have any other facts or points to share about the process of foreclosure, please feel free to leave a comment.