Definition of foreclosure

On this page, we will provide the definition of foreclosure. We will also describe its steps and list the different types.

Let's begin by tackling some of the key terms. Although this is pretty boring stuff (yawn), we need to get through it so that you can better understand the alternatives that we will discuss later on.

Foreclosure is a legal process that a person or institution uses to force the sale of a property in order to try to get back the money that is owed.

Notice that there's no mention of the word criminal in the definition. You will not be going to jail for not paying your mortgage, so let's dispel with that myth once and for all.

In the United States, each state decides how it handles the foreclosure process. This decision comes down to whether they use a deed of trust to secure the loan or a mortgage.

A deed of trust and a mortgage both secure the loan for the lender by pledging the property in question as collateral.

A mortgage involves two parties: the mortgagee (lender) and the mortgagor (you). These states use a judge for the foreclosure process. Because a judge in a court is used this is known as a judicial foreclosure.

A deed of trust involves three parties: A trustor (you), a beneficiary (the lender) and a trustee who actually holds the title to the property and who can later sell the property if the borrower doesn't meet his end of the bargain (i.e. make the payments). Since no judge is needed, it is known as non-judicial foreclosure.

Please be sure to click on the links above in order to see the various steps for each of the two foreclosure situations: judicial and non-judicial. They will be helpful in determining how long each process takes to complete.

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