Foreclosure

Click on a state you're interested in to search foreclosed homes

Foreclosure is a legal term denoting an order of a court, by disposing of a property to satisfy the loan extended by a person. Foreclosure normally arises out of the situation wherein the person, who has availed themselves of the loan, has failed to pay it on time and the person who lent the money then follows the legal procedures to receive the money lent. The person who is the receiver of the loan is called a mortgagor. The person who lends the money is the mortgagee. A mortgage is an extension of a pledge or a special variety of a pledge, where the property in question is charged so that in the event of failure of a loan taken on the property, the lender has recourse to the property.

Normally the charge of mortgage is created on immovable properties like houses. The financial institution such as a bank lends the money to the would-be owner of the house, on certain conditions for repayment of the loan, fixing the number of installments and the interest payable thereon. The buyer of the house is the mortgagor. The institution is the mortgagee. The mortgagor agrees to pay the loan on a fixed day, failing which the mortgage can exercise his options for the repayment of his loan.

Foreclosure is the right of a mortgagee to get back his money given as a loan. In case of failure of the scheduled repayments, the mortgagee approaches the court, to exercise his right of Foreclosure; upon which action the court sanctions the award empowering the mortgagee to sell or otherwise dispose of the property in question.

The Foreclosure extinguishes the mortgagor’s equity of redemption. The property in question is incidentally a method of security. So equity will decree a reconveyance deed and permit the mortgagor to redeem his forfeited property.

But the right of foreclosure should be exercised within a reasonable time. In the same way, the foreclosed property should be redeemed within the time allotted by the court by the mortgagor. When this order of priority fails, the homes come out for auction in public, much to the woe of the owner of the house. Even the lending institution would find it difficult to proceed with the cumbersome court procedures and prefers a smooth transition of ownership.

The people, in general, are aware of the consequences of the default in repayment of scheduled fixed installments. Yet, in many a cases, the foreclosure of the loans do happen much to the detriment and disappointment of both the parties involved. In fact, in simple terms, even if the owner of the property chooses to close the loan much in advance, it is known as a foreclosure. But, legally the court awarded sanction is better understood when it comes to foreclosure.