Janson Designs

Foreclosure is the legal process in which a mortgagee obtains a court order to terminate a mortgagor’s equitable right of redemption. A borrower mortgages an asset like a house or any other property to secure the loan from the lender, who in turn obtains a security interest from the borrower. Commonly the violation of the mortgage is a default in payment of a promissory note. If the borrower defaults, the lien holder repossesses the property. But if the borrower repays the debt, the courts of equity can grant the borrower the equitable right of redemption. In such a case, the lender cannot be sure whether he can successfully repossess the property and he tries to foreclose the equitable right of redemption. When the lender is assured of default of the loan from the borrower, he has the right to go for the foreclosures in which he has the right to sale the mortgaged property. During the signing of the documents, the right of foreclosure is mentioned in the promissory notes. When the process is complete, the lender can sell the property and keep the proceeds to pay off its legal costs and mortgage. Other lien holders can also foreclose the owner’s right of redemption for debts such as overdue taxes, unpaid contractor’s bills or assessments.

The process of foreclosure varies from state to state. The two most widely used foreclosures are:-

• Foreclosure by Judicial Sale: This is the most important foreclosure and is found in almost every state. It involves the sale of mortgaged property under the supervision of a court. The proceedings start first to satisfy the mortgage, then other lien holders and finally the borrower or mortgagor if any proceeds are left. The involvement of the Judiciary makes it more formal.
• Foreclosure by power of sale: This foreclosure is widely used by many states. Most of the nations prefer it because of its simplicity. This process involves the sale of the mortgage property without the supervision of the court. The proceeds go from mortgage holder to the lien holders to the mortgagor.

On the basis of property, some of the foreclosures are as follows:-

• Home foreclosure: Foreclosure home is the property that acts as a lien for the borrower for a secured loan. After the default, it becomes the property of the lender and then it is he who decides to sale the property. It is of great advantage for the buyer as foreclosure homes provide a very suitable and affordable range and is the best way to get a cheap house.
• Foreclosure Real Estate: The foreclosure real estate provides an opportunity for the buyer to buy that real estate which could not be possible otherwise. As the lender legally owns the property, so it is he who decides about the sale of property. Often, he is more interested to sale it as he needs cash for the mortgage loans. For this reason, the Real Estate foreclosure proves to be very cheap.

There are certain options that present home-owners the ways to avoid foreclosure such as refinancing, a short sale, alternate financing and temporary arrangements with the lender.