The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. ( November 2013) ( Learn how and when to remove this template message) Unsourced material may be challenged and removed. Please help improve this section by adding citations to reliable sources. In many states in the United States, items included to calculate the amount of a deficiency judgment include the loan principal, accrued interest and attorney fees less the amount the lender bid at the foreclosure sale. If the promissory note was made with a recourse clause and if the sale does not bring enough to pay the existing balance of principal and fees, then the mortgagee can file a claim for a deficiency judgment. 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". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a " mortgage" or " deed of trust". 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 homeowner association dues or assessments. Therefore, through the process of foreclosure, the lender seeks to immediately terminate the equitable right of redemption and take both legal and equitable title to the property in fee simple. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property. 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. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. įormally, 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). 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 the lender by forcing the sale of the asset used as the collateral for the loan.
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