Foreclosure is the legal process by which a mortgage company can obtain legal ownership of a property.  It relinquishes a home owner from any and all right to the property and evicts the homeowner from the premises.

When a home owner neglects to make the monthly mortgage payment on his or her house, resulting in a default against the mortgage, a lender will foreclosure on the home in order to sell it at a public auction to recover the money owed by the loan. If any money remains after the loan is paid off, the remainder is applied towards any junior liens and encumbrances in the order of their priority.  Any further excess would be paid to the owner. 

In Arizona, there are two types of foreclosure options available to a lender: 1) foreclosure on a Deed of Trust (often referred to as a non-judicial foreclosure) and 2) foreclosure on a mortgage (referred to as a judicial foreclosure).  

A Deed of Trust (also referred to as a Trust Deed) is a security document used to transfer "bare" or "naked" title (because of its limited rights) from the borrower (known as the trustor) to a third party, known as a trustee.  The trustee holds title for the benefit of the lender (known as a beneficiary) until the borrower pays off the note or lien against the property.  The deed of trust is recorded with the county and shows that there is a lien against the home.  Lenders prefer deeds of trust because foreclosure is swift and easy due to the lack of judicial proceedings that must take place to repossess the home.  The only requirement is for the trustee to give the appropriate statutory notices as outlined in Arizona law (click here for more information on the foreclosure process in Arizona).

A mortgage is a security document that, in a majority of the states, allows the borrower (referred to as the mortgagor) to retain title of the property while using the property as security for a loan by placing a lien on the property by the lender (referred to as the mortgagee).  When the borrower pays off the loan, the lender gives the borrower a satisfaction of mortgage that, when recorded, removes the lien.  A mortgage deed can only be foreclosed through court action.

Since most homes have a deed of trust against the property (versus a mortgage), the non-judicial foreclosure is the most common foreclosure process in Arizona.

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