Legal Definitions - mortgage foreclosure

Mortgage foreclosure is a legal process where a lender (the mortgagee) takes action to end a borrower's (the mortgagor's) ownership of a property. This is done either to gain ownership of the property or to force a sale to pay off the unpaid debt secured by the property.

There are different types of mortgage foreclosure:

• Equitable foreclosure: This is a court-ordered sale of the property, with the proceeds used to pay off the mortgage debt. Any surplus is paid to the borrower.
• Judicial foreclosure: This is a court proceeding that involves many legal steps, such as filing a complaint, serving notice, and holding a hearing. It is a costly and time-consuming process, but it is available in all jurisdictions and is the most common method of foreclosure in at least 20 states.
• Nonjudicial foreclosure: This is a foreclosure method that does not require court involvement. It can be done through a power-of-sale foreclosure, where the property is sold at a nonjudicial public sale by a public official, the mortgagee, or a trustee, without the stringent notice requirements, procedural burdens, or delays of a judicial foreclosure.
• Strict foreclosure: This is a rare procedure that gives the mortgagee title to the property without first conducting a sale, after a defaulting borrower fails to pay the mortgage debt within a court-specified period.

For example, if a borrower fails to make mortgage payments, the lender may start a foreclosure process to take ownership of the property. The lender may choose to go through a judicial foreclosure, which involves going to court, or a nonjudicial foreclosure, which does not involve court action.

Another example is if a borrower owes property taxes and fails to pay them, the local government may start a tax foreclosure process to seize and sell the property to pay off the taxes owed.