A foreclosure is a legal proceeding in which the lender, who is usually the lien holder or mortgagee, obtains a court ordered termination of the borrowers or mortgagors equitable right of redemption. This simply means that the real estate or property is possessed by the lender from the mortgagor.

• There are numerous types of foreclosures and there are many legal ways of avoiding them or postponing them. The most common types of foreclosures are foreclosure by judicial sale and foreclosure by power of sale. Foreclosure by judicial sale is also known as judicial foreclosure and involves the sale of property under the supervision of a state or local court. In a judicial foreclosure the proceeds first go the first lien holder and then to any other lien holders and after that (if any amount remains) to the mortgagor.
• In a foreclosure by power of sale there is no court supervision and such types of mortgages are allowed in many states. These are usually deeds of trust that were used instead of using pure mortgage. A deed of trust is nothing but an escrow in which a trustee which is a third party or entity holds the deed as a security. A power of sale foreclosure usually has a clause in the mortgage stating that it is a power of sale mortgage.
• There are some other types of foreclosures; however they are usually rare and available to limited people. One such foreclosure is strict foreclosure which is available in Connecticut, New Hampshire and Vermont. In such foreclosures a suit is filed by the mortgagee and the court gives a specific period of time for the mortgagor to pay up. If the mortgagor fails to pay up then the mortgagee has the right to possess the title of the property without selling it. This style of foreclosure is usually accessible only when the worth of the assets is a reduced amount compared to the debt.
• A deed in lieu of foreclosure is one which can save the mortgagor from foreclosure and reduce the lenders losses as well. In such types of foreclosures the borrower (mortgagor) conveys all interest in the property to the mortgagee. In such an arrangement the borrower not only gets better negotiation terms but also protects his or her credit report which would other wise have been inserted in the credit report in a pure foreclosure.
• In a deed in lieu of foreclosure the indebtedness must be secured by the real estate or property that is transferred. Furthermore both parties in the contract must be doing so in good faith and with complete consent. The settlement agreement must have a value that is equal to the fair market value of the property. Sometimes the mortgagee will not agree to a deed in lieu of mortgage if the value of the property is less than the money owing.

If you have any other points or facts to add about the various types of foreclosures, please feel free to leave a comment.