There are two types of foreclosures : Judicial and Nonjudicial.



The type of legal notice filed depends upon the laws of the state where property is located. If the state allows either a judicial or a nonjudicial foreclosure, the lender will usually opt for the nonjudicial foreclosure. The judicial foreclosure is carried by the court, while the nonjudicial foreclosure is carried out through a process, not directly supervised by a court.

Each state has different set of rules and procedures of how a foreclosure needs to be conducted. It is common for the lenders to provide additional time, beyond statutory requirements, in their lending contracts and forms. Each state has established rules regarding collection activities. Threats are not permitted and the telephone calls from the lender to the borrower are also regulated. Their frquency, timing and content are regulated, but the lender would always demand payment, giving a helping hand at the same time. It is an established fact that the defaulting borrower stays in the property and does not abandon it. Signing a deed to the property to someone else does not relieve the homeowner of the responsibillity of his loan payment. Until that loan is paid in full, the borrower is still obligated to pay the money borrowed plus interest and any legal expenses.

When a borrower stops making the monthly payments, the loan becomes a nonperforming asset or NPA for the lender. Usually lender starts calling the borrower every 15 days past the due date. Payments not received for 3-4 months are identified as NPA. The sooner the lender is able to get rid of a NPA, the better it is for the lender. This is because accumulation of too many NPAs can also attract the attenion of government regulators. Lender’s goal at this point of time is to cut further losses. Usually there is a clause in the loan, which allows the lender to make the full amount of the principal due immediately when the borrower breaches the contract. This is called mortgage acceleration and it makes the full amount due and not just the part of the loan that is past due. Acceleration of a mortgage is not specifically authorized by a state or federal law but rather by the loan agreement signed by the borrower and the lender, when the loan was granted. The mortgage acceleration is often referred to as calling in the loan. It is done when the lender decides there is no further sense in chasing the borrower for the monthly payments.