In real estate, foreclosure is one of the most common ways for a lender to satisfy a mortgage loan balance. With a foreclosure, a lender will force the sale of a property in order to recoup the money that it is owed. In other words, a foreclosure is gaining possession of the collateral of the borrower. While foreclosures have been the most common way for banks and other lending institutions to collect from delinquent mortgage borrowers, it has a considerable number of obstacles. These obstacles have proven to hurt both lenders and borrowers. The obstacles include significant losses for lenders, difficulty selling a property at an auction and also going through a very rigorous process to complete a foreclosure. According to a former Secretary of the Treasury, foreclosures do not benefit anyone.
Foreclosures have been quite controversial over the past decade. Right before the financial crisis that began in 2007, many people were taking on mortgage loans that they couldn’t actually afford. This lead to delinquencies and lenders had to take back lots of properties. The foreclosure rate made up about 4 percent of all housing units in the United States. However, that rate has gone down to pre crisis levels at 0.5 percent. Therefore, the housing market and the mortgage industry have seen a recovery.
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