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Foreclose
This is the right of a mortgagee to take control of a property and sell it
off regardless of the wishes of the owner. The bank or building society will then
be exercising its power of sale.
This right to foreclose will have been
set out in a mortgage deed. It is the ultimate safeguard open to a lender which
cannot get its money back in any other way. If all else fails, and the court agrees,
the bank or building society can foreclose.
The mortgagors, the borrowers,
will only be at risk of foreclosure if they fall significantly behind with the
agreed repayments or interest payments. In other words, providing the original
payment schedule is being maintained, a mortgagee has no right to take possession
of the property.
A right to foreclose only arises if the date stipulated
for the full repayment is passed or, if the mortgage deed states that the full
outstanding loan falls due once a certain number of individual payments are missed.
Other than in exceptional circumstances, no court will grant possession after
just one or two arrears. There must be a pattern of failure and little prospect
of recovery.
In either case, in relation to a residential property, a foreclosure
requires the approval of the High Court. If a reasonable repayment schedule can
be agreed – and maintained – then the lender is unlikely to be granted
a possession order. The safeguards against eviction are strong. The courts do
all they can to avoid granting a final possession order which will usually be
suspended for at least six months.
Most lenders will accept suspension
of their possession application – subject to a revised repayment schedule
– unless the property is in negative equity (q.v.) and the shortfall likely
to increase the longer matters are left to run on. Then the delay may be opposed.
Obviously,
one should not take on a mortgage lightly or without sound professional advice,
but if you run into problems please take advice immediately when there will be
more options open. Once you are in arrears the lender is in control.
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