In the article I’ll tell you about why it is important to Know The Process Of Foreclosure In Mortgage Loans. If you have to make a loan, most lending companies require collateral as security for your loan application. The contract of security is called a mortgage contract. Mortgage can either be real estate mortgage, where what you will use as security is a real property, and a chattel mortgage where instead of real property what is being offered as security is a personal property.
If the personal property is not enough, several personal properties may be mortgage to satisfy the entire amount of loan. Mortgage is an ancillary contract of the principal contract of loan.
Since it is merely an ancillary contract its term shall not be executed unless the debtor failed to pay the principal amount of loan. However, once he failed, what the creditor-mortgagee will do is to foreclose the property subject of mortgage contract.
Foreclosure is a legal process where the mortgagee acquires court order terminating the equitable right of the mortgagor over the property. The property will be subject to foreclosure sale since the creditor-mortgagee cannot directly acquire it automatically from failure to pay by the debtor-mortgagor. During the foreclosure sale, the property is offered for bidding.
The highest bidder will win the foreclosure sale and shall have the property registered under his name. For real estate mortgage, the real property offered as security shall have the annotation of mortgage. Upon foreclosure sale, there must be a publication of the intended sale in order to inform all those possible claimants of the real property.
The publication will serve as a notice to all. Failure to object upon knowledge of the intended foreclosure sale is a waiver of rights over the real property subject of sale. For personal property, such publication is not required. A mere notice to the owner or debtor-mortgagor is sufficient to make the sale valid and binding.
Once the foreclosure sale was performed, the highest bidder shall be declared as the one who shall have the right to register it under his name. In real property mortgage, the mortgagor shall have the equitable right of redemption to redeem the said property usually within a year, in a period provided by law or according to the agreement of the parties.
If the mortgagor failed to redeem the property, the awarded buyer shall have the absolute right over the property. The proceeds of the sale shall be applied to the principal loan plus the cost of the foreclosure sale. Any excess amount shall be given to the debtor-mortgagor.
Foreclosure can be made either judicially or extra-judicially. The former is made through intervention of the court while the latter is made only upon agreement of both parties.
Foreclosure of mortgaged property usually takes time to carry out completely. The right of the debtor-mortgagor over his property must be properly observed. Several properties cannot be subject to foreclosure and they must be respected. Although foreclosure sale is the fastest way for creditor to be paid by the debtor, it is expensive and sometimes requires court litigations.