These days we’re seeing more and more homes going into foreclosure. This is due in part to the economy, and in part to the sub-prime lending fiasco of the past few years. Sometimes it’s simply due to borrowing beyond one’s means, or unexpected financial setback such as losing a job.

A foreclosure is legal proceeding in which the holder of a mortgage, or other lien holder, usually a lender, obtains a court ordered termination of the agreement and takes possession of the property.

When someone takes a mortgage or home loan, the lender obtains a security interest from the borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults on payment, the lender or mortgage holder can try to repossess the property. This is a foreclosure.

Besides failing to pay the mortgage note or loan, 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 HOA dues or assessments.

The actual process of foreclosure on a residential mortgage loan can begin after the owner has failed to comply with the mortgage agreement. At that point, the creditor, usually the bank, would want to take possession of the property in order to try to recover their principle by reselling the property.

In foreclosure, the lender can opt to try and sell the property and keep the proceeds to pay off its mortgage and any legal costs. When this happens, this is considered as a lender foreclosing on the mortgage or loan. While there are some legal remedies, it is obviously much better to avoid going into foreclosure to begin with.

by Marty Allen
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Click here for more information about homeowner rights on a foreclosure

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