What Are the Different Types of Foreclosure?

Man looking at house in hand and wondering options - Foreclosure concept

Foreclosure on your home can happen in a number of different ways. The laws and procedures may also vary from state to state. If you are behind on mortgage payments or facing financial hardship as a homeowner, it’s important to understand types of foreclosure, how foreclosures work, and do what you can to avoid foreclosure on your property.

Judicial vs. Nonjudicial Foreclosure

This is the first terminology to understand, as all foreclosures fall into one of these two primary categories. The most common type of foreclosure is “judicial.” In this scenario, a lawsuit is filed by the party that is trying to repossess the property. It will typically be the lender or bank. The foreclosure process then goes through the court system. Florida, South Carolina and New York are a few of the states where judicial foreclosure is less common.

In other states, you will find nonjudicial foreclosure to be more prevalent. Some of these states include California, Michigan and Arkansas. These types of foreclosure happen outside the court system. The states have specific laws and rules in place that allow the lender/bank to begin the foreclosure process when the situation calls for it.

Many other states will offer a choice between judicial and nonjudicial foreclosures, depending on the situation between the lender and the homeowner who is defaulting on their mortgage loan.

Foreclosure Terminology

Here are a few other key terms you need to know about foreclosure:

Mortgage Delinquency (Default)

When a homeowner is late on making their mortgage payments, they are defaulting on their loan. The more official term used by banks and courts is usually “delinquent.” If a homeowner is delinquent on their mortgage payments and unable to pay the amount owed within a specified time period, the lender may begin the foreclosure process. Most lenders and banks will give you every chance to pay off your debts and back payments. Foreclosures aren’t ideal for them either, as they typically end up losing a lot of money in the process. If you get a foreclosure notice from your lender or bank, talk with them and understand your options. They may be willing to work with you toward a viable solution.


This is another important term you will hear if you are facing foreclosure. A lien may be put on your property, which could limit your options. A lien is a legal claim by the creditors to collect on a debt. Legally, it prevents the owner from attempting to sell, refinance or transfer ownership of the property. If you are behind on your mortgage payments and worried about foreclosure, you will want to explore your home selling or refinancing options before you get to a point where a lien is enacted.

Deficiency Judgment

A deficiency judgment is when the house goes into foreclosure, but sells for less than what the owner still owes. In this case, the owner will still be legally responsible for the repayment of the outstanding amount. Deficiency judgments are not allowed in all states, though, so it’s important to know your state’s foreclosure laws and short sale options before you get to a point of no return.

Foreclosures are not good for anyone involved. The homeowner’s credit will take a major hit and they may find it hart to buy another home in the future. The lenders will usually end up taking a loss, as well. Before you get to the point where your house is being foreclosed upon or when you get that first warning notice from the bank, you should do everything you can to avoid foreclosure.

You might be able to work something out with your lender. You might be able to preemptively sell your property to an investor. If you are worried about foreclosure, contact PropertyLark today to see what home selling or financing options may be available to you before it’s too late.