There was a time when the word foreclosure was limited to the world of mortgages. The ordinary person was not much aware of it. Today foreclosures are having such an impact in USA with ripples being felt internationally, that there is hardly anyone who does not know the word – foreclosure. Circumstances are such that one is being made to know it. The simple act of buying bread is linked with foreclosure. The price of the loaf has increased. Why? As a chain reaction of foreclosures.

Ignorance about foreclosures is taken to be one of the main reasons for the reigning supremacy of foreclosures. Hence it is important to understand it. The boat is sinking. The roof above the head is about to be blown away. The victim has to know about plugging lines and screwing down sheeting if one does not want to sink or be blown away.

Simply put – foreclosure is a legal process. What is law? Law is codified common sense. A borrower is given a loan and the lender keeps a security in case the borrower fails to repay. This is an age-old practice. In property matters the house, which the borrower purchases with the loan money, is kept as collateral or security by the lender. The basic understanding on black and white is that the borrower will pay each month a certain amount towards repayment of capital together with the interest for a stipulated number of years. If the borrower fails to keep the repayment schedule then the lender has the legal right to take over the property and realize dues. In other words the lender forecloses the mortgages – or closes it ahead of schedule.

Each state in America has different foreclosure laws but the basic understanding is the same. In some places the lender can start off foreclosures early but generally 90 days gap is required in lapses. Before foreclosure starts when the borrower fails for the first time the person is said to be defaulting. After 90 days the borrower becomes delinquent. At this point the lender notifies the borrower and the court. By this the lender seeks the permission of the bank to proceed with the steps required for realizing unpaid dues. The court, gives a date for hearing to be convinced that the allegations of the lender are true and correct. If satisfied the court then gives a date for the auction of the property. From the proceeds of the sale the lender can only take the due amount. Tax authorities also realize dues. The balance goes to the borrower.

The recent hullabaloo over foreclosures is very unusual because of the sheer number of people losing their houses to it. Moreover the houses are failing to sell at the auctions because the worth of the house has become less than the loan dues. This is primarily because of the falling real estate. Unsold houses are causing problems for society and the authorities. It is a vicious circle with stocks tumbling across the globe.

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