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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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