Foreclosure: Overview

When a lien creditor, in order to satisfy the debt owed to it, resorts to a sale of the liened property through the foreclosure process, the property rights of the debtor and junior lien creditors are intended to be extinguished. In order to insure the title subsequent to such a sale, the title insurer must be satisfied that 1) all statutory and contractual requirements of the foreclosure process were complied with, thereby eliminating any possibility that the sale will be overturned, and 2) there are not outstanding Rights of Redemption. 


Foreclosures can be divided into two classes. Non-Judicial foreclosure, allowed in many states, requires little or no involvement by any court, and is usually the quickest and most inexpensive choice for mortgagees (including Beneficiaries under deeds of trust). The process of Judicial foreclosure (through a court) is used because it is the only means of effecting the enforcement of a particular type of lien (e.g., lien of a money judgment through sheriff’s sale). The foreclosure process is governed by state statutes and the terms of the lien instrument. The particular requirements of the state’s foreclosure statutes must be followed.