When a homeowner defaults on their mortgage payments, a lender may attempt to recover the balance of the loan by forcing the sale of the asset (i.e., the home) used as collateral for the loan. The foreclosure process differs by local jurisdiction. Some areas of the country execute the process via “judicial foreclosure,” which involves the sale of a mortgaged property via court supervision. Other areas foreclose via a “nonjudicial foreclosure,” in which the sale of the property by the mortgage holder is conducted without court supervision.
A few states conduct the process via “strict foreclosure,” where a court orders the defaulted mortgagor to pay the mortgage within a specified period of time, and if they fail to do so, the mortgage holder gains title to the property with no obligation to sell it. In all of these cases, when the foreclosure process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs.