Understanding the Basics of Foreclosure

A foreclosure happens when a lender gains legal rights over the borrower’s pledged assets because of the borrower’s incapacity to meet his/her obligations. Foreclosures usually occur in home loans and mortgages.

There are three basic types of foreclosures, namely the judicial foreclosure, the power of sale, and the strict foreclosure. This legal process varies from state to state. Basically, though, the debtor needs to prove that his/her claim for foreclosure is valid and accurate.

Any wrongful termination of the borrower’s “right of redemption”, or the borrower’s right to get his/her pledged assets back, can be contested by the borrower under the court of law.

The borrower can easily challenge the validity of the foreclosure claim and sue the lender for damages. During the court proceeding, the lender has the burden of proving evidences that the claim to foreclosure is valid.

Once the foreclosure is confirmed, a foreclosure auction is held. In this auction, the borrower’s pledged property will be put up for bidding. The lender or mortgager could sell the property in the same price as the borrower’s remaining balance.

In any event that the property fails to attract bidders, it remains in the hands of the lender or mortgager. S/he can then choose to sell the property though usual real estate methods.