foreclosure

noun fore·clo·sure \ (ˌ)fȯr-ˈklō-zhər \
Updated on: 13 Oct 2017

Definition of foreclosure

:an act or instance of foreclosing; specifically :a legal proceeding that bars or extinguishes a mortgagor's right of redeeming a mortgaged estate

Recent Examples of foreclosure from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'foreclosure.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of foreclosure

1713


Financial Definition of FORECLOSURE

foreclosure

What It Is

Foreclosure occurs when a lender seizes and sells a borrower's collateral after the borrower has failed to repay the lender. The term is most often associated with real estate.

How It Works

In general, there are eight events involved in a foreclosure (in this example, we assume the borrower has obtained a mortgage for a house from the lender).

1. The borrower signs a contract agreeing to repay the lender over a period of time, usually in predetermined installments.
2. The borrower misses one or more payments.
3. The lender sends the borrower one or more notices of delinquency.
4. The borrower and the lender try to adjust the repayment schedule so that the borrower is more likely to make at least some of the payments until he or she gets back on his feet. (This process is called special forbearance or mortgage modification.)
5. The borrower misses additional payments.
6. The lender sends the borrower a notice of default and initiates foreclosure proceedings.
7. The lender puts the property up for sale and publishes a notice of the sale in the local paper. The notice includes a description of the property, the name of the borrower, and other information. The borrower might file Chapter 13 bankruptcy to stop the foreclosure temporarily.
8. A public auction occurs during business hours, and the highest bidder is usually entitled to buy the property. At that point, the borrower cannot get the property back unless he or she buys it back.

Why It Matters

The foreclosure process can take several months, if not years, and it does long-term damage to a person's credit report. It is important to note that foreclosure laws vary by state, and they affect the order or duration of these steps. It is also important to note that the federal Fair Debt Collection Practices Act affects foreclosure proceedings by stipulating the methods lenders can use to go after bad debts.

[Click here to read Seven Ways to Stop a Foreclosure on Your Home]


Law Dictionary

foreclosure

noun fore·clos·ure \ fōr-ˈklō-zhər \

legal Definition of foreclosure

1 :a legal proceeding that bars or extinguishes a mortgagor's equity of redemption in mortgaged real property — see also deficiency judgment at judgment, redeem, right of redemption, statutory foreclosure, strict foreclosure 1
2 :the extinguishment (as under the provisions of Article 9 of the Uniform Commercial Code) of the rights of a debtor in personal property subject to a security interest by judicial proceedings and especially by judicial sale — see also strict foreclosure 2


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