For homeowners, the one word that invokes the most concern is foreclosure. The trustee mails a notice of default and a “notice of home loss danger” to the owner (and any other persons holding an interest in the property) of the amount of the debt and the sale date, time and place, and publishes notice of the sale in a newspaper.
The most common reason buyers need to ask for an extension of the closing date is that the lender has not completed loan processing and delivered loan documents to title several days prior to closing to allow time for both the seller and the buyer to sign.
By selling the house, the homeowner should be able to get a reasonable price for it. If the homeowner waits and lets the lender sell it, the sale price is almost certainly going to be much lower, because the lender just wants to offload the property as fast as possible.
The only difference is that there is no right to collect a deficiency from the owner following foreclosure, if the mortgage was given as collateral to the seller of the property, or if the mortgage was given to a bank or other lender for a debt of less than $50,000, and the money was used to pay for the property.
With some exceptions, foreclosures go through court in the following states: Connecticut, Delaware, District of Columbia (sometimes), Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana (executory proceeding), Maine, Nebraska (sometimes), New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma (if the homeowner requests it), Pennsylvania, South Carolina, South Dakota (if the homeowner requests it), Vermont, and Wisconsin.