Foreclosures
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower, who has stopped making payments to the lender, by forcing the sale of the asset used as the collateral for the loan.[1]
Formally, a mortgage lender (mortgagee), or other lienholder, obtains a termination of a mortgage borrower (mortgagor)‘s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).[2]
Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries torepossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can successfully repossess the property.[3] Therefore, through the process of foreclosure, the lender seeks to foreclose (in plain English, immediately terminate) the equitable right of redemption and take both legal and equitable title to the property in fee simple.[4] Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowners’ association dues or assessments.
The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust.” Commonly, the violation of the mortgage is a default in payment of apromissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien.” If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgment. In many states in the United States, items included to calculate the amount of a deficiency judgment include the loan principal, accrued interest and attorney fees less the amount the lender bid at the foreclosure sale.[5]
Types of foreclosure
The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States, Canada and many other countries, several types of foreclosure exist. In the U.S., two of them – namely, by judicial sale and by power of sale – are widely used, but other modes of foreclosure[6] are also possible in a few states.
Judicial foreclosure
Foreclosure by judicial sale, more commonly known as judicial foreclosure, which is available in every state (and required in many), involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. Under this system, the lender initiates foreclosure by filing a lawsuit against the borrower. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state. A judicial decision is announced after the exchange of pleadings at a (usually short) hearing in a state or local court. In some rather rare instances, foreclosures are filed in federal courts.
Nonjudicial foreclosure
Foreclosure by power of sale, also known as nonjudicial foreclosure, is authorized by many states if a power of sale clause is included in the mortgage or if a deed of trust with such a clause was used, instead of an actual mortgage. In some states, like California and Texas, nearly all so-called mortgages are actually deeds of trust. This process involves the sale of the property by the mortgage holder without court supervision (as elaborated upon below). This process is generally much faster and cheaper than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.
Strict foreclosure
Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure, which is available in a few states including Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee and if successful, a court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of the property is less than the debt (“under water“). Historically, strict foreclosure was the original method of foreclosure.
Celebration
Celebration is a census-designated place (CDP) and a master-planned community in Osceola County, Florida, United States, located near Walt Disney World Resort and originally developed by The Walt Disney Company. As part of theOrlando–Kissimmee Metropolitan Statistical Area, Celebration’s population was 7,427 at the 2010 census.[3]
Subsequent to founding Celebration, Disney followed its plans[4] to divest most of its control of the town. Several Disney business units continue to occupy the town’s office buildings, and two utility companies, Smart City Telecom and Reedy Creek Energy Services, both operated from Walt Disney World, provide services to the town. The town itself remains directly connected to the Walt Disney World resorts via one of its primary streets, World Drive, which begins near the Magic Kingdom.
Downtown Celebration’s post office was designed by Michael Graves, the adjacent Welcome Center is by Philip Johnson and the Celebration Health building by Robert A. M. Stern.[5] Other nearby buildings are designed by well known architects including: Charles Moore (Preview Center), Graham Gund (Bohemian Hotel), Cesar Pelli (movie theatre), Robert Venturi andDenise Scott Brown (SunTrust Bank).[6]
Response to Celebration has ranged from an early visitor who said it resembled the too-perfect town of “The Stepford Wives“[5]to those who see Celebration as an example of unabashed neo-urbanism.[7]