Foreclosure is the process whereby a mortgagee (e.g., the bank) obtains court approval forcibly to terminate the mortgagor’s (e.g., the homeowner) equitable right of redemption because of default. In layman’s terms, a foreclosure is where the courts allow the bank to take away a person’s house because they didn’t pay the mortgage. Federal laws apply, as do state laws-and state law varies tremendously from state to state.
Foreclosure is noted on an individual’s credit history and often results in substantive financial loss to both the mortgagor and the mortgagee. In fact, foreclosure is so costly that in many instances the mortgagee, or bank, will offer the mortgagor favorable terms to voluntarily vacate the premises.