Foreclosure (FCL)

Foreclosure is a situation in which the lender or the mortgagee, seizes and sells the property, if the homeowner or the mortgagor fails to make principle and/or interest payments on the mortgage. Under mortgage a borrower pledges to lender as security, an asset, like a house to secure the loan.

If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. In some cases, creditors try to make adjustments to allow the homeowner to retain ownership. This situation is known as a special forbearance or mortgage modification.

Deed in Lieu Of Foreclosure is a potential option taken by a mortgagor (a borrower) to avoid foreclosure under which the mortgagor deeds the collateral property (the home) back to the mortgagee (the lender) in exchange for the release of all obligations under the mortgage. This is done with the consent of both sides.