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Foreclosure
Foreclosure is the legal and professional
proceeding in which a mortgagee, or other lien holder, usually a lender, obtains
a court ordered termination of a mortgagor's equitable right of redemption.
Usually a lender obtains a security interest from a borrower who mortgages or
pledges an asset like a house to secure the loan. If the borrower defaults and
the lender tries to repossess the property, courts of equity can grant the
borrower the equitable right of redemption if the borrower repays the debt.
While this equitable right exists, the lender cannot be sure that it can
successfully repossess the property, thus the lender seeks to foreclose the
equitable right of redemption. Other lien holders can also foreclose the owner's
right of redemption for other debts, such as for overdue taxes, unpaid
contractors' bills or overdue homeowners' association dues or assessments.
The foreclosure process as applied to
residential mortgage loans is a bank or other secured creditor selling or
repossessing a parcel of real property (immovable property) after the
owner has failed to comply with an agreement between the lender and borrower
called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage
is a default in payment of a promissory note, secured by a lien on the property.
When the process is complete, the lender can sell the property and keep the
proceeds to pay off its mortgage and any legal costs, and it is typically said
that "the lender has foreclosed its mortgage or lien". 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.
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