Loans

Foreclosures

Insurancebible Foreclosures Foreclosure occurs when your lender takes possession of your home because you failed in your mortgage or line of credit.

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

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc.. All Rights Reserved. foreclosure.
The destruction of the rights of the borrower in the mortgaged property, except may be authorized under the laws giving a right to post-foreclosure eviction process redemption.The varies by state but usually captured in separate judicial and non-judicial foreclosures.

judicial foreclosures involve filing a petition with the court, asking the court to enter an order as to the amount due under a mortgage, and then the granting of permission to lender sell the property and apply the proceeds to the debt.
non-judicial seizures are accomplished by providing a kind of public notice of the default bid and scheduled 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 purchaser the foreclosure of the full amount of the purchase price plus interest at the rate specified in law. This is different from the equity of redemption.
The long-term equity of redemption means all rights of the borrower prior to foreclosure, but who are off to foreclosure. If the borrower has every right after the foreclosure, they are granted special status by giving a right of redemption.
Some states have consumer protection laws to guard against predatory buyers taking advantage of the panic of foreclosure from homeowners.
If a borrower deeds the mortgaged property to the lender to avoid foreclosure, which is called a deed in lieu of foreclosure. It's a risky route for the lender because all the privileges remain on the property, even those who may have been authorized by a decree of foreclosure.
In most states, if a foreclosure sale does not bring enough money to satisfy the debt, the lender can sue the borrower for something called a deficiency judgment.Exceptions occur in states that limit this right when the debt is a first mortgage on the residence of the borrower. Another exception would be if the borrower has negotiated a non-recourse mortgage loan that it isolates from personal liability.
Aforeclosure obliterates the rights of the owner (except as noted above) and virtually all creditors who may have filed claims after the mortgage has been prevented. This includes second mortgages, if the first mortgage is prohibited.

The five main categories of parties who may still have claims on the property after a foreclosure is

1. Those who hold mortgages or other claims that were filed before the mortgage that has been foreclosed.
2. The IRS, if the lender foreclosure does not give proper notice required by federal law.
3. "Those holding mechanics liens and material suppliers, which could be the work started on property before the mortgage was made, but perfected by the filing of documents after the mortgage was recorded.
4. Local governments and state in which property taxes are due.
5. A trustee in bankruptcy, which can cancel a foreclosure, in appropriate circumstances.