What is a 'foreclosure'?

Foreclosure is defined as the legal process through which a lender takes possession of a property when the borrower is unable to meet the mortgage repayment obligations. This typically occurs after the borrower has fallen significantly behind on their payments, signaling to the lender that recovery of the loan may not be possible without taking possession of the collateral—the home itself.

In this process, the lender initiates legal proceedings to reclaim the property, which often involves court action and the opportunity for the homeowner to address the debt. If the foreclosure proceeds, the lender may eventually sell the property to recover the outstanding loan balance. Understanding foreclosure is essential, as it highlights the serious consequences of missed payments and the rights of both borrowers and lenders under mortgage contracts.