Foreclosure - Encyclopedia

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FORECLOSURE, in the law of mortgage, the extinguishment by order of the court of a mortgagor's equity of redemption. In the law of equity the object of every mortgage transaction is eventually the repayment of a debt, the mortgaged property being incidental by way of security. Therefore, although the day named for repayment of the loan has passed and the mortgagor's estate is consequently forfeited, equity steps in to mitigate the harshness of the common law, and will decree a reconveyance of the mortgaged property on payment of the principal, interest and costs. This right of the mortgagor to relief is termed his "equity of redemption." But the right must be exercised within a reasonable time, otherwise he will be foreclosed his equity of redemption and the mortgagee's possession converted into an absolute ownership. Such foreclosure is enforced in equity by a foreclosure action. An action is brought by the mortgagee against the mortgagor in the chancery division of the High Court in England, claiming that an account may be taken of the principal and interest due to the mortgagee, and that the mortgagor may be directed to pay the same, with costs, by a day to be appointed by the court and that in default thereof he may be foreclosed his equity of redemption. English county courts have jurisdiction in foreclosure actions where the mortgage or charge does not exceed soo, or where the mortgage is for more than soo, but less than that sum has been actually advanced. In a Welsh mortgage there is no right to foreclosure. (See also MORTGAGE.)

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