Foreclosure

Foreclosure

Process by which the holder of a mortgage seizes the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract.

Foreclosure

A situation in which a mortgage lender takes possession of the property because the borrower has not made payments on interest or principal for a certain period of time. Once the lender takes over the property, it usually sells at a discounted price so as to recover the amount lost on the mortgage loan. Foreclosure results in a loss for the lender and is obviously quite detrimental to the borrower; as a result, it is the last resort. Most of the time, lenders attempt to work with the borrower to come up with a better solution, such as extending the repayment period in order to lower payments. See also: Forbearance.

Foreclosure.

Foreclosure occurs when your lender repossesses your home because you have defaulted on your mortgage loan or home equity line of credit.

You default by failing to pay interest and repay the principal you owe on time. Foreclosed property is often sold at auction to allow the lender to recover some of or all the outstanding debt.

foreclosure

the refusal by a VERTICALLY INTEGRATED firm to supply inputs to non-integrated rivals, or distribute their products, as a means of putting them at a competitive disadvantage. Under UK COMPETITION POLICY, cases of vertical integration may be referred to the COMPETITION COMMISSION for investigation. See REFUSAL TO SUPPLY.

foreclosure

the refusal by a VERTICALLY INTEGRATED firm to supply inputs to non-integrated rivals, or distribute their products, as a means of putting them at a competitive disadvantage. In market situations where there are a substantial number of alternative independent supply sources and outlets, rival suppliers are unlikely to be inconvenienced. However, the control by a DOMINANT FIRM of the majority of input sources and outlets, combined with limitations on the establishment of new ones, could have serious anti-competitive consequences. Under UK COMPETITION POLICY, cases of vertical integration may be referred to the COMPETITION COMMISSION for investigation. See REFUSAL TO SUPPLY.

foreclosure

The destruction of a borrower's rights in mortgaged property, except as may be allowed under statutes giving a post-foreclosure right of redemption.The foreclosure process varies among states,but generally segregates into judicial foreclosures and nonjudicial foreclosures.

• Judicial foreclosures involve filing a petition with a court, asking that court to enter an order as to the amount due under a mortgage loan, and then granting the lender permission to sell the property and apply the proceeds to the debt.

• Nonjudicial foreclosures are accomplished by providing some sort of public notice of the default and scheduled auction of the mortgaged property, and then carrying out the auction process.

• Some states allow a statutory right of redemption after foreclosure. This gives the borrower, and sometimes other creditors of the borrower, a certain amount of time to redeem the property by paying the foreclosure purchaser the full amount of the purchase price plus interest at a rate defined in the statute. This is different from the equity of redemption.

• The term equity of redemption means all rights of the borrower before foreclosure, but which are extinguished at foreclosure. If the borrower has any rights after foreclosure, they are granted by specific statutes giving a right of redemption.

• Some states have consumer protection statutes to guard against predatory purchasers taking advantage of foreclosure panic on the part of homeowners.

• If a borrower deeds the mortgaged property to the lender in order to avoid a foreclosure, that is called a deed in lieu of foreclosure. It is a risky route for the lender because all liens remain on the property, even those that might have been cleared off by a foreclosure.

• In most states, if a foreclosure sale does not bring enough money to satisfy the debt, the lender may sue the borrower for something called a deficiency judgment. Exceptions occur in states that limit that right when the debt is a first mortgage on the borrower's primary residence. Another exception would be if the borrower has negotiated a nonrecourse mortgage that insulates it from any personal liability.

• Aforeclosure obliterates the rights of the owner (except as noted previously) and virtually all creditors who might have filed claims after the mortgage was foreclosed. This includes second mortgages, if the first mortgage is being foreclosed.

The five major categories of parties who may still have claims on property after a foreclosure are

1. Those who hold mortgages or have other claims which were filed before the mortgage
     that was foreclosed.

2. The IRS, if the foreclosing lender did not give it the proper notice required by federal law.

3. Those holding mechanics' and materialmen's liens, which might be for work started on
     the property before the mortgage was taken, but perfected by filing documents after the
     mortgage was recorded.

4. Local or state governments to which real estate taxes are due.

5. A bankruptcy trustee, who may set aside a foreclosure under the proper circumstances.

Foreclosure

The legal process by which a lender acquires possession of the property securing a mortgage loan when the borrower defaults.

See Payment Problems/Position of the Lender/Permanent Problem.