What Is a Foreclosure?

A foreclosure is the forced sale of property by a financial institution. Foreclosures usually occur when a property owner obtains a home loan from a lending institution, such as a bank, and uses the home as collateral for repayment of the loan, thereby placing a mortgage on the property. If the property owner does not pay back the home loan, the lending institution has the right to foreclose on the property, which involves taking it away from the property owner and using it to pay off the remaining debt on the loan.

The Foreclosure Process

A foreclosure process is technically the lawsuit brought by the financial institution to force the sale of property to satisfy an outstanding debt. Typically, a court will fix the balance due on the mortgage, including interest accrued, and orders a sale of the property. The court will then apply the proceeds of the sale to the outstanding debt. The owner, however, has a right to pay the financial institution off before the foreclosure sale in order to keep the property.

Some states also allow a property owner to pay the remaining debt and reclaim their property after it has already been sold.  This is known as a statutory right of redemption, and this right only exists for a set number of days stated in the state's law.

What If There Is an Acceleration Clause in My Mortgage's Promissory Note?

An acceleration clause is an important feature in a mortgage, and can often cause a premature foreclosure action. The acceleration clause allows the bank to declare the entire loan due if the property owner misses a certain amount of mortgage payments. Notice that if a mortgage has an acceleration clause, the bank has the right to sue not only for the missed payment but also for the entire sum of the loan. Generally, the property owner must be provided with adequate notice before the lending institution can utilize the acceleration clause.

Should I Consult an Attorney If My Property Is Being Foreclosed On?

If you feel you may default on your mortgage and lose your property via foreclosure, an experienced foreclosure attorney can help you determine if there are other options available to you, including filing for bankruptcy. A lawyer can also represent you in a foreclosure proceeding to make certain your rights and interests are protected.


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