What is Foreclosure?

Foreclosure is the legal process of terminating all rights that an immovable property owner has by a lending institution. This is whereby the lending institution or the mortgagee, mostly banks or other legal creditors regain the property due to a number of reasons. A mortgage is a loan that one receives by giving immovable property as collateral. The mortgagee in this case will have to acquire a court order denying the mortgagor redemption rights of the property he gave as collateral.

Reasons that may cause the mortgagor to foreclose are such as; bankruptcy of the mortgagee, death, divorce and domestic strife among others factors which may prevent completion of the mortgage payments, even though not all is lost for the borrower for there are still avenues to contest a foreclosure. This may include petitioning the court for an injunction thus barring the foreclosure from taking place, the borrower may also try to renegotiate with the lender to postpone or elongate the duration for the mortgage payment or reduction of interest rates to make the mortgage more affordable or rather manageable for the borrower.

There are mainly two types of foreclosures, which are judicial foreclosure and non-judicial foreclosure. Non-judicial foreclosure, which is also known as foreclosure by power of sale, can only take place in the event that a mortgage has a clause known as power of sale authorizing this type of foreclosure. The mortgage holder in this case can dispose the property without court supervision, thus making this type of foreclosure faster and less costly for one does not incur costs of hiring counsel.

Judicial foreclosure, which is preferred by many just as its name suggests, occurs when sale of the mortgaged property is done under court supervision with the moneys acquired from the sale being used to clear the mortgage and whatever is left after the mortgage is cleared going to the mortgagor. The lender suing the borrower after which all the parties are notified of the foreclosure in this case files a lawsuit. This consequently leads to a hearing at a local court, though this type of foreclosure is vastly applied by most, it is quite costly as compared to the latter for one has to incur the legal fees from the court proceedings.

Foreclosures is mostly practiced in the United States though several other countries are practicing too, these include countries such as; China, Ireland, Australia, United Kingdom, South Africa among other countries nevertheless it's an ordeal that one doesn't want to encounter.

The problem of foreclosure has troubled many families especially due to economic crisis that shook financial stability of both governments and financial institutions globally that were acting as lenders. In such cases, it prompted the lenders not to elongate the mortgage payment period of the mortgagors. Right now it is stated that roughly 4.8 million homes in the United States alone are facing foreclosure, almost half a million underwent foreclosure last year alone. The numbers alone are just traumatizing though it has also prompted people to start reconsidering about their financial choices and maybe someday such misfortunes are never going to be heard of again.