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Foreclosures 101

The basic needs of an individual are food to eat, clothes to wear and a place that serves as a shelter. These common requirements transcend the differences associated with an individual's ethnicity, social status or financial portfolio.

Of the three basic requirements, probably the most expensive basic need to meet is that of shelter. There are several ways that shelter from the elements can be obtained. Individuals or families can choose to live with other relatives, while some families choose to rent a house or an apartment, or other family units may choose to purchase their own home.

In many cultures homeownership is a dream come true. In addition, purchasing a home is typically the largest investment that an individual or family can make. Often, homeownership is expensive and requires the purchasing of the property through a mortgage.

A mortgage is a legal and binding document entered into by two parties. Those two parties are the financial institution that lends the money and the person or persons to whom the money is being lent. A mortgage is a big financial step to take and requires monthly payments over an extended period of time. In fact, mortgage is a French word that literally means death vow. Fulfillment of the mortgage is guaranteed in the terms of this contract and is secured by the property that is being purchased.

Unfortunately, life takes a variety of twists and turns. These twists and turns could include the loss of a job or sickness in the family which can produce an added financial burden. This burden may hamper the ability of an individual or family to fulfill their mortgage payments in purchasing the house and therefore cause a violation of the agreement. Payments that are in arrears may lead to foreclosures.

What Is A Foreclosure?

Failure to fulfill the terms of the mortgage, nonpayment, may lead to what is called a foreclosure. Foreclosures are legal options in which the lending institution repossesses the property in question. The repossessed property can then be disposed of as the financial institution sees fit. Often foreclosures are sold to other interested parties in order to recover the financial institution’s investment. There are two types of foreclosures.

Deed In Lieu Of Foreclosure

This type of foreclosure is an action taken by the financial institution when the individual defaults on the mortgage. The lender will take legal action and secure ownership of the property in question by claiming the title that is held as a lien on the property.

Following this action by the lender, the property in question becomes part of an auction that is overseen by an officer within the court system. Generally this officer is the sheriff.

Bidding on this type of foreclosure involves interested parties which can include other financial institutions. If the ownership of the property is not awarded during the bidding process, the ownership of the property in question is returned to the lending financial institution.

Non-Judicial Foreclosure Option

The other form of foreclosure is called the statutory or non-judicial foreclosure. This particular foreclosure option is initiated by the lender or their representative. Often this representative will be an attorney. The family that is in default will be served with a legal notice that reflects the lender’s option of foreclosing on the property with the intent to sell.

The property is then placed in a public auction. Ownership of the foreclosed property is awarded to the highest bidder. Also, included in the financial obligations of the transferred property to the highest bidder, may be the cost of any unpaid property taxes.

Foreclosures Are At All Time Highs!


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