What is meant by "Foreclosure"?

Foreclosure specifically refers to the legal process that occurs when a borrower fails to make mortgage payments on a property, leading the lender to take possession of that property. This process allows the lender to recover the amount owed on the defaulted loan by selling the property, usually at a public auction. During foreclosure, the lender typically follows certain legal steps to ensure compliance with state and federal regulations, which often includes providing notice to the borrower and allowing them a chance to remedy the default before the foreclosure is finalized.

The definition captures the essence of foreclosure as not merely about managing properties or negotiating transactions but as a significant financial and legal mechanism for lenders to recoup their losses when borrowers are unable to meet their mortgage obligations. In contrast to property management or negotiations, which involve voluntary agreements or oversight, foreclosure is initiated as a result of a default and encompasses specific legal ramifications that impact both the lender and the borrower.