Foreclosure orders allow lenders to take possession of a property used as collateral for a loan when the borrower defaults. In many jurisdictions, lenders cannot repossess residential property without a court-issued foreclosure order. This protects the borrower’s rights and ensures that the lender has complied with legal requirements. Courts review the circumstances surrounding the default to prevent unscrupulous or illegal behavior by the lender.
A foreclosure order is a written statement from a court, authorizing a lender to take possession of a property that has been offered as collateral for a money loan. It is a remedy that a lender can request once the borrower fails to meet his promise to make payments as required by the terms of the loan. The involvement of the court at this stage of the lending process ensures that a lender cannot repossess real property without demonstrating to an independent third party that the situation entitles the lender to possession of the property and that he has complied with the requirements of the law.
In many cases, people buy residential property by taking out a loan to pay for the transaction. Banks and finance companies usually provide these types of loans. They guarantee repayment by taking a security interest, or mortgage, on the property purchased. This mortgage allows the lender to take the property in repayment of the loan if the borrower defaults on his obligations under the loan agreement.
If a borrower stops making payments under the loan agreement, he or she is in default. The lender can then bring proceedings against the property to take it from the borrower in repayment of the debt. The law requires that the process of foreclosure of a person’s home go through the court system in a proceeding called foreclosure. This prevents unilateral action by the lender that can wreak public havoc as private lenders attempt to remove households from homes under circumstances that the lender assesses and controls.
In most jurisdictions that have a legal system based on English common law, residential property cannot be taken by a lender from a defaulting borrower without a foreclosure order from the court. A foreclosure order is a written court decision establishing that the lender is entitled to possession of the property in question. This requirement distinguishes residential repurchase based on a mortgage from other types of property repurchase based on other types of loans. For example, in many jurisdictions, a lender can repossess a car financed with an auto loan without going to court, because the borrower agrees to summary repossession in the event of default as a provision of the loan.
The requirement that a lender obtain a foreclosure order before moving to take possession of residential property is similar to the requirement that a landlord obtain an eviction order before evicting a tenant. Public policy protects the sanctity of a home and requires that the party seeking foreclosure adequately demonstrate to an independent party its right to possession before it allows a private party to trespass on another person’s home. Courts perform this function and review the circumstances surrounding the default to ensure that the lender has not engaged in any unscrupulous or illegal behavior before issuing the foreclosure order.
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