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The Process of Bank Foreclosure

Bank foreclosure is the process whereby the lender in a mortgage agreement takes possession of and liquidates the property of the borrower. Bank foreclosure occurs when the borrower is unable to meet the terms of the property loan agreement and both the borrower and the lender have been unable to work out alternative arrangements. Bank foreclosures have been the target of negative press in the last couple of decades as many farms have failed while under mortgage. While it would be great if bank foreclosure could always be avoided, it is a necessary fact of life. Lenders would be much less willing to take the risk of providing a mortgage if they would not be able to recoup some of their losses via bank foreclosure if the lender proved unable to meet the terms of the loan agreement.

Bank foreclosure in the United States typically occurs in one of two ways. The most common type of bank foreclosure is the "deed in lieu of foreclosure." In this arrangement, the lending entity comes into full possession of the title, either at the bequest of the borrower or, more commonly, as part of the terms spelled out in the original mortgage contract. In this form of bank foreclosure, the property is typically sold at auction by the county sheriff or other state recognized entity. The other common type of bank foreclosure occurs in states that allow non-judicial bank foreclosures to occur. In these bank foreclosures, the lender auctions the property directly. In both types of bank foreclosure, the proceeds of the auction go towards offsetting the loss incurred by the lender......

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