FORECLOSURE

WHAT IS FORECLOSURE?
Foreclosure is the legal method by which a lender seeks to recover the amount owed on a defaulted loan by gaining possession of and selling the mortgaged properties. Typically, default is caused when a borrower misses a certain number of monthly payments, but it may also happen when the borrower fails to satisfy other conditions in the mortgage contract.
In India, the Transfer of Property Act, 1882 governs the law on mortgage. A mortgagee (person who advances or lends the money) is entitled to recover his outstanding money under the right of foreclosure. This right is available under Section 67 of the Transfer of Property Act, 1882.
The act regards six types of mortgages, namely-
1. simple mortgage
2. mortgage by conditional sale
3. usufructuary mortgage
4. English mortgage
5. mortgage by deposit of title deeds
6. anomalous mortgage.
A mortgagee can exercise his right to foreclosure only under the following conditions-
• The payment of the debt amount is due.
• The mortgage deed contains no contrary terms as regards time for repayment.
• Mortgage money is due, but the mortgager does not have a decree of redemption of the mortgaged property.
• The mortgagor can pay off his loan after the mortgage money is due
• in the following three ways:
1. By paying or tendering the mortgage amount directly to the mortgagee.
2. By filing a redemption lawsuit.
3. By depositing the amount in the court.
• Mortgagee should not have public works such as channels, trains, etc. as the mortgage.
• A trustee or legal representative of the mortgagee cannot file a suit for foreclosure but the sale only.
The right of foreclosure is a counterpart of the right of redemption. Right to foreclosure can be limited in nature subject to the contract between parties, but the right to redemption is an absolute right, which cannot be limited in any way.
-By Anushka Tripathi
NMIMS SOL, Bangalore

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