What is Foreclosure?
Foreclosure is the legal process by which a Mortgagee, or other lien holder, usually a Lender, obtains a court ordered termination of a Mortgagor’s equitable right of redemption. Lender’s use the Trust Deed, the security interest recorded against a property in exchange for making a loan, to repossess the pledged asset from the Borrower in the event the Borrower defaults (fails to repay) the loan. Other lien holders can also foreclose for other debts, such as overdue taxes, unpaid contractors’ bills, or overdue homeowners’ association dues or assessments.
NOTE: When the process is complete, the lender can sell the property (either on the open or at public auction) and keep the proceeds to pay off its mortgage and any legal costs. If the Promissory Note was made with a recourse clause (personal guarantee by Borrower), if the sale of the property does not bring enough to pay the existing balance of principal and fees, the Mortgagee can file a claim for a deficiency judgment against the Borrower for the balance owed.