Foreclosure – A definition
Foreclosure is the legal process that is characterized by the transferring of property ownership from the mortgage debtor to the mortgage lender. Mortgage contracts in Alberta, Canada feature an agreement between the mortgage lender and the mortgage debtor stating that in the event of foreclosure, the mortgage debtor needs to sell his property to pay-off his debt to the mortgage lender.
Why does a mortgage foreclose?
A mortgage forecloses because of the occurrence of a default. Default refers to the failure of the mortgage debtor to fulfill his financial obligations to the mortgage lender. Mortgage debtors can experience a mortgage default in different ways. Here are two of the reasons why a mortgage forecloses due to defaults:
Failure to pay-off the debt.
- One of the most common causes of mortgage foreclosure is the failure of the mortgage debtor to repay his debt to the mortgage lender. Mortgage debtors fail to pay-off their debt because they are either unable or unwilling to do so.
- Many mortgage debtors suffer from default because they are unable to save enough financial resources to repay the entire debt. Reasons for the inability to pay-off the debt may include the sudden loss of job or the emergent spending of money.
- Other mortgage debtors simply experience defaults because they are unwilling to fulfill their financial obligations to the mortgage lender.
Failure to follow the conditions.
- Every mortgage agreement features a set of terms and conditions that needs to be followed by both parties. The violation of any of these terms and conditions may lead to the invalidation or dissolution of the mortgage contract.
- If the mortgage debtor violates the terms and conditions listed in the mortgage contract, then there will be an occurrence of a default and a possible foreclosure.