Also known as: powers to foreclose · foreclosure power · right to foreclose
Written by attorneys · grounded in primary & secondary sources — see below
The authority of a mortgagee or secured creditor to terminate the mortgagor's equity of redemption and sell the encumbered property to satisfy the debt. This authority arises upon the mortgagor's default and is typically triggered by acceleration of the full obligation under the note or mortgage. Exercise of the power requires compliance with any statutory notice or cure requirements and must occur in good faith.
Perry Pratt borrowed funds from Pinnacle Holdings secured by a mortgage on commercial property. After Pratt missed two installment payments, Pinnacle exercised its contractual right to accelerate the entire debt. Pinnacle then initiated nonjudicial foreclosure proceedings to sell the property and recover the full balance due.
Paul Peterson and his spouse held property as tenants by the entirety. The United States obtained a tax lien against Peterson alone. The government exercised its power to foreclose the lien by selling the entire property and accounting to the non-liable spouse for her interest.
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Default by the mortgagor, such as failure to pay an installment or breach of a covenant, activates the power. The mortgage or note usually contains an acceleration clause that makes the entire debt due upon default. Acceleration must be exercised in good faith and may require notice or a cure period in some jurisdictions.
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Yes. When the secured obligation is transferred, the mortgage follows the debt by operation of law unless the parties expressly agree otherwise. The transferee therefore acquires both the right to collect and the power to foreclose without needing a separate recorded assignment.
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A valid deed in lieu transfers title to the mortgagee in full satisfaction of the debt and ends the foreclosure right as to that mortgagee. The deed must be voluntary and supported by consideration. Junior lienholders not party to the deed may still assert their interests depending on jurisdiction.
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…cannot be unilaterally alienated. In United States v. Rodgers , 461 U. S. 677 (1983), we considered the Federal Government's power to foreclose homestead property attached by a federal tax lien. Texas law provided that " the owner or claimant of the property claimed as homestead [may not], if married, sell or abandon the homestead…