FORECLOSURES

Foreclosure is the legal proceeding in which a mortgagee, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the owner the right of redemption if the borrower repays the debt. When this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption.

The foreclosure process, as applied to residential mortgage loans, is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. 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". Perhaps the easiest way to buy foreclosed property is buying REOs ("real estate owned"). An REO occurs when the lender takes back the property to gain possession and cut its losses.

The lender, however, does not want the property because it is not in the real estate business and is therefore usually motivated to move the property quickly.The lender is usually the senior lien holder, thereby wiping out all other liens at the sale. This means an REO will always have clear title, which saves a lot of time, expense and worries when buying foreclosures. Most likely, the lender will also have paid any property taxes in arrears. The lender may either repair the property to acceptable standards or allow a discount to the buyer to accomplish the repairs.

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