THE FORECLOSURE PROCESS
Methods of Foreclosure
Non-Judicial
Most lenders and banking institutions prefer non-judicial
foreclosure because it is less expensive, less time consuming and does not
involve the courts. The Deed of Trust is the security document used by most
lenders. The parties in a Deed of Trust foreclosure are:
- Trustor/Grantor: the borrower
- Grantee/Beneficiary: the lender
- Trustee: the third-party
representative who holds the title
The trustee represents the lender
or beneficiary. The trustee's sole purpose is to hold the title of the property
as security against the debt. The Deed of Trust's power-of-sale clause gives
the trustee the authority to sell the property for the lender or beneficiary if the borrower
fails to make the monthly mortgage payments.
Judicial
A mortgage is the security document
that allows the borrower to keep the title of the property while using it as security
for a loan. The lenders and banking institutions place a lien on the property
in case the borrower does not make the agreed payments. When the borrower pays
off the loan, the lender gives the borrower a satisfaction of mortgage that removes
the lien from the property. The following chart shows a comparison of the
processes of mortgage judicial foreclosure and Deed of Trust non-judicial
foreclosure:
|
Mortgage Judicial Foreclosure
|
Trust of Deed Non-Judicial
Foreclosure
|
Foreclosure Procedures by State
Each state has laws that dictate the manner of foreclosure and whether a foreclosure is judicial or non-judicial. Some states allow both types of foreclosure, but each state favors one over the other.
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