Foreclosure – (Definition & Meaning)

Foreclosure – (Definition & Meaning)

Foreclosure – (Definition & Meaning)

Foreclosure means forfeiture of a right of redemption on a property (generally when a person fails to pay a mortgage). Even if no payment has been made, the borrower normally retains an equitable right of redemption if he can raise the money to exercise the right.

To clear the title of this potential right, a lender can apply to the court for a date to be decided, on which the entire amount becomes payable.

If payment is not been made, the property belongs entirely to the lender, who is then under  a free authority to either go into possession or to sell the property.

Types –

  • Statutory Foreclosure– is a foreclosure by performance of a power of sale clause in the mortgage without the need for the action of court, since the foreclosure must be done in accordance with the statutory provisions governing such sales.
  • Strict Foreclosure– is a procedure to which the court ascertains the amount which is due under a mortgage, orders and directs its payment under a specified limited time and prescribes that on being a defaulter of such payment a debtor will permanently loose his/her equity of redemption, the right to get back the property on payment of the debt, costs and interest.

The title of the property is absolutely conveyed to the creditor on default in payment, without any sale of the property.

 

 

(Visited 33 times, 1 visits today)