‘Foreclose’ is a common word in today’s society. In the modern world of finance, mortgages are an accepted way to pay for those things we wouldn’t otherwise be able to afford. We take out mortgages in order to pay for a new house, a car, or even to pay another debt. However, not many of us consider the foreclosure. We assume that it will never happen to us, since we’ll always meet the payments.
However, a more formal or legal definition may be called for. To paraphrase a more formal explanation, a foreclosure is the legal process in which the owner’s right to the property is forfeited, often by default. It usually involves a sale of the property in an auction in order to raise money to meet the mortgage.
A more legal definition of foreclosure is “a procedure where a party who has loaned money and taken a mortgage or deed of trust on a property forces the property to be sold.” By this sale, the lender recovers the loan and interest after the debtor is incapable of meeting the payments. The enforcement of a foreclosure is often backed by judiciary power, though this is not always necessary.
There are other types of foreclosure, though all of them fall within the wider definition. One, the foreclosure by power of sale, is the foreclosure and sale of the home without the oversight of the courts. Strict foreclosure is the process in which the lender petitions the court and the court then requires the debtor to pay within a certain amount of time. If the debtor fails to meet the payment requirements, the lender is awarded the property, without the requirement of selling it.
It may be necessary to point out that ‘property’ need not indicate real estate or housing, but anything which is the property of the debtor. However, for the most part, when a foreclosure is mentioned, the property is assumed to be real estate.
As we can see, the definition of foreclosure is more complex than some borrowers realize.