What is foreclosure?

Foreclosure refers to a legal process allowing a lender to take possession of a property when the borrower fails to meet the obligations of the mortgage agreement, typically by missing payments. In this context, the lender exercises their right to reclaim the property, which serves as collateral for the loan. This process is initiated after the borrower defaults, meaning they have not adhered to the agreed-upon payment schedule. The goal is to recover the outstanding debt by selling the property, which often results in the borrower losing their home.

Understanding foreclosure is critical because it underscores the importance of maintaining mortgage payments and managing financial obligations to avoid severe consequences, such as losing one's home. Other terms, like refinancing, involve renegotiating loan terms, and debt management solutions generally focus on handling existing debts without losing property. Selling off assets to settle debts is related but distinct from foreclosure since it doesn't necessarily involve a legal action by a lender.