What is foreclosure?

Foreclosure refers specifically to the legal process by which a lender takes possession of a property when the borrower fails to meet the mortgage repayment obligations outlined in their loan agreement. This situation typically arises when the homeowner defaults on their mortgage, meaning they have not made the required payments for a specified period of time.

During foreclosure, the lender may initiate a series of legal actions to reclaim and sell the property so that they can recoup their financial losses from the unpaid loan. This process involves courts and may lead to an auction of the property where it is sold to the highest bidder.

The choice regarding selling a property at auction is a result of the foreclosure process but does not define it. Similarly, loan modifications and refinancing are alternatives available to borrowers in distress that do not equate to foreclosure itself. Foreclosure is fundamentally about the lender's right to recover their collateral— the property— when the loan obligations are neglected.