Receiving a foreclosure notice in the mail isn’t exciting by any means. However, simply ignoring the notice won’t do you any good either. Failure to respond could make the situation far worse. What’s important is that you stay informed so you have options if you’re dealing with foreclosure.
Today we want to go over the two different types of foreclosure that you might experience, including judicial foreclosure and nonjudicial foreclosure.
Judicial foreclosures take a long time. Your lender likely won’t want to go the judicial foreclosure route unless you owe tons of money on your mortgage. In the judicial foreclosure scenario, the court will be petitioned by the lender to formally repossess your home.
Once your home has been sold, you will have to pay the difference between the home’s selling price and the total amount left on the mortgage. Lenders can do this thanks to what we call a deficiency judgment. Because judicial foreclosures end with tons of debt, they’re far more difficult for both parties to endure.
One very common method lenders use to recover their losses is the nonjudicial foreclosure process. Instead of trying to take homeowners that are trying to sell a house through the court system to get their money back, they instead repossess the home and sell it. In the deed of trust, you have what is called a power-of-sale clause, which makes this possible.
The majority of lenders prefer the non-judicial foreclosure process, as it is far less expensive than the judicial foreclosure process. Instead of having to deal with representation, court costs, or debt collection agencies, most lenders would opt in for cutting their losses, as a nonjudicial foreclosure process is a far more economically efficient option.
However, prior to inducing the nonjudicial foreclosure process, there are a few things the lender must do.
- To start, the lender must get in contact with you to gain an understanding of your financial situation, as they can then come up with potential solutions to avoid the foreclosure process altogether. To represent you during this discussion, you have the option of getting a lawyer or HUD-certified counselor.
- If you have not come to an agreement or reached a solution after 30 days have gone by, the lender has the ability to initiate the foreclosure process. The beginning of this process is the Notice of Default,
- The lender can then issue a Notice of Sale if you have not caught up with payments before the 90-day time limit. 21 days after that, the home can be sold at auction.
- Once the home is sold, you will receive a notice in the mail to vacate the property within three days. The lender will receive ownership of the home if it does not sell during auction.
If you want to avoid any of these types of foreclosure altogether, your best option might be to sell to an investor like HelloPad. We try to make things as easy as possible for you so that you do not have to deal with the hassle of the foreclosure process on your own.