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Welcome To Our
Foreclosure Guide!
Everything You Always Wanted to Know About
Foreclosure...
Featured Article:
Definition of Foreclosure on Default of Payment of Property
Loans
Foreclosure is a legal term often on the minds of many American homeowners.
The average American family works hard to afford a home in which their
family can live comfortably. Most families do not have the cash up front to
pay for their dream house in full. They will seek a loan from a financial
lending institution such as a bank or a mortgage company to buy this home.
To secure the loan, these financial lending institutions must be certain
that they will get back their money back. Since a good paying job does not
guarantee that a loan of this magnitude will be paid back, they require what
is known as collateral, an asset they can seize in lieu of payments if the
loan is in default (no longer being paid back).
Normally the home that is being purchased with the loan is put up as
collateral and if the mortgagor (person seeking the loan) does not pay back
the loan to the mortgagee (money lender, borrower), the house goes into
foreclosure. The money lending institution may obtain a court order to
proceed with the foreclosure and repossess or seize the house in lieu of
repayment of the loan.
In some instances the financial lending institution may attempt foreclosure
on a home or other property, but if the borrower repays the loan, a court of
equity may rule in favor of the borrower who at that point will be able to
keep the home or property in question.
The contract between the financial lending company and the borrower is
called a mortgage or deed of trust. When a contract has been entered,
effectively the lending company has agreed to give the borrower a certain
sum of money in which to purchase the said property. The borrower agrees to
pay this money back (signs a promissory note). The contract will also
stipulate that a lien will be placed on the property meaning that the
financial lending company has a right to seize the property (repossess it)
if the loan is not repaid in the time frame that is stipulated and according
to the conditions set out in the contract.
The process of foreclosure is used in any contract whereby real estate,
homes, farms, land, and other immovable property has been obtained through a
mortgage, and the mortgage holder has defaulted on the payments.
Judicial Foreclosure is available in all the American states. When the
borrower defaults on the loan, the property is sold. The proceeds from the
sale of the property first goes to repay the balance on the existing loan,
then to any other lien holders, and finally to the borrower if any proceeds
are left over. All transactions are done legally through the court system.
Foreclosure by power of sale is sometimes added as a clause in the mortgage
contract that defines the foreclosure procedure without court intervention.
This procedure follows the same order as the Judicial Foreclosure however
faster since the courts are not involved.
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