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Real Property • Security Interests in Real Estate
PROP#220
Legal Definition
Foreclosure is the process in which a property is sold to satisfy a debt in whole or in part.
Plain English Explanation
"Foreclosure" comes from an Old French word forclos, which meant "to close." It was used in the sense of "shutting someone out" or preventing them from doing something. When applied to property law, "foreclosure" is an act that prevents someone from redeeming a mortgage and then enables the person who is owed money to try to relieve the debt by selling the property.
In other words, a "mortgage" occurs when a party tells another party, "Hey, I need to borrow money, but I promise I'll pay you back. In fact, if I don't pay you back, you can have my property. But, if I do pay you back, the property is mine fair and square." A "foreclosure" is the lender saying, "Yeah, sorry, you broke your promise and I'm tired of waiting on you, so you lost your chance to have your property back because I'm going to sell it."
However, note that in another card you'll learn about the redemption in equity right, which gives the debtor one last chance to make things right and not lose their property.
In other words, a "mortgage" occurs when a party tells another party, "Hey, I need to borrow money, but I promise I'll pay you back. In fact, if I don't pay you back, you can have my property. But, if I do pay you back, the property is mine fair and square." A "foreclosure" is the lender saying, "Yeah, sorry, you broke your promise and I'm tired of waiting on you, so you lost your chance to have your property back because I'm going to sell it."
However, note that in another card you'll learn about the redemption in equity right, which gives the debtor one last chance to make things right and not lose their property.
Related Concepts
How do states treat a mortgage without a note?
How do states treat a note without a mortgage?
How is a mortgage's priority determined?
How may a party be a holder in due course of a note?
In lieu of foreclosure, what do many installment contracts prefer and how do courts address this alternative?
Under which theories may a mortgagee take possession of a property and begin receiving rents before foreclosure?
What are the 5 types of security interests in real estate?
What are the benefits of the holder in due course status?
What are the limitations of a junior interest?
What are the methods of transferring a note?
What interests does a foreclosure destroy?
What is a deficiency judgment?
What is a due on sales clause?
What is an installment land contracts?
What is a receivership?
What is a redemption in equity?
What is a statutory redemption?
What is the distribution order of proceeds from a foreclosure?
What is the result of a grantee assuming the mortgage?
What liabilities are associated with a mortgaged property that is transferred to another party?
What occurs in intermediate theory states?
What occurs in lien theory states?
What occurs in title theory states?
What results from a party purchasing a foreclosed property subject to a senior interest?
What security interests exist under a absolute deed?
What security interests exist under a deed of trust?
What security interests exist under a installment land contract?
What security interests exist under a mortgage?
What security interests exist under a sale-leaseback?
Who may transfer their interest in a mortgage?
