Foreclosures

Foreclosure is a phenomenon that is dreaded by existing debtors. Foreclosure occurs when the lender or lending institution decides to foreclose (i.e. to stop all possibility of) the mortgagor’s option of paying back the lender and thus obtaining his/her rightful property.
Obviously, neither lender nor borrower wants to indulge in the process of foreclosure in housing loans. For the borrower, it means the loss of something that has seen a lot of investment – both financial and emotional. For the lender, it means a long transaction that leads to assets staying frozen over a long period of time.
Foreclosures, when they take place, can do so by many methods. The two most popular methods are:

1. Judicial foreclosure. In this process, the mortgaged property is sold under court supervision. The proceeds from the sale go to satisfy the remaining mortgage amount, followed by other liens. Any remaining proceeds go to the mortgagor, ie the borrower.
2. Foreclosure by power of sale. In these cases, the mortgage holder is directly authorized to sell the property. This is permitted by a “power of sale” clause included in the mortgage, or when a “deed of trust” is used in place of the mortgage agreement. Proceeds from the sale are distributed as in judicial sale. This is a faster and more efficient process than judicial sale.

However, foreclosure can lead to property being made available at extremely cheap rates to people who have the finances to purchase it. With a good real estate agent, it is possible for the lending institution to generate profits off foreclosed homes as opposed to having to deal with them as liabilities for long periods of time.