Going through the process of Foreclosure

Foreclosure in the simplest terms may be defined as the process under which a lender decides to end partnership with the borrower following a breach by the latter. A breach happens when the borrower fails to make payments as stipulated in the terms of mortgage contract. Foreclosure involves the sale of the property that had been placed by the borrower as security for mortgage to settle the principal among other costs of business. The lender initiates the sale by seeking legal back up to get a favorable bidder for the same property, and that explains why the real property given must be in tandem with the value of the mortgage awarded.

The borrower can technically be protected by the court of equity, should they seek to acquire more time in anticipation they’ll be able to settle the debts. This is a benefit that is given to the borrowers to at least try to save their property as it is only natural for them to incur a lot of losses during a foreclosure. In most cases, the bank or financier which acted as the lender may start bids for property at a low gauge, actually lower than the real value of the property. This is because the default may have happened when the arrears were only little, and the minimum bid placed by the mortgagee will represent the amount needed to balance the sheets.

Sometimes the real valuation of the property may be lower by far compared to the intended principal collection. In this case, the mortgagee hikes the initial bid offer and normally this tends to put off the bidders who are used to capitalizing on such scenarios for cheap property. If the proceedings are not favorable to the mortgagee, in the sense that they do not satisfy the required amount and the books remain in arrears, there is a legal process of filing for deficiency.

In other cases, the mortgagee may be part of the bidders of the same property they put up for auction. The most amazing thing about this is they are the only bidders who can be given the opportunity to bid on credit. This scenario is seen as an attempt by the lender to maximize profits from the sale of the real property, by perhaps assessing the current market valuation and waiting for the best time to reap maximum profit from the sale, this time with no principal to consider.

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