Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to their lender by forcing the sale of the asset used as the collateral to make the loan obligation.

Formally, a mortgage lender (mortgagee), or other lienholder, obtains a termination of a mortgage borrower (mortgagor)’s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).

Typically a lender obtains an interest in a property when the borrower pledges the home to secure their loan. If the borrower defaults on that obligation, the lender will try to repossess the property. Courts may grant the borrower a right of redemption if the borrower repays the delinquent mortgage amount. Throughout the foreclosure process, the lender seeks to foreclose the right of redemption and take both legal and equitable title to the property. Other lien holders may also try to collect on any outstanding debts secured by the property. Usually such items as second liens, overdue taxes, unpaid contractors’ bills or overdue homeowners’ association dues.

Foreclosure Process

When the foreclosure process is applied to residential mortgages, the bank is trying to sell or repossess the property after the owner has failed to comply with the mortgage agreement. When there is a violation of the mortgage or a default in payment of a promissory note on a property secured by a lien on the property, the lien holder is trying to take possession of the property and legally sell the property and keep the proceeds to pay off its mortgage and any legal costs.

If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgment. Which is why it is best to take all efforts to stop the foreclosure process.

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