What is a "foreclosure"?

A foreclosure refers to the legal process in which a lender takes possession of a property when the borrower defaults on their mortgage payments. This situation typically arises when a homeowner fails to make their mortgage payments as outlined in the loan agreement, leading the lender to initiate foreclosure proceedings to reclaim the property.

This process involves the lender selling the property, often at a public auction, to recover the outstanding loan amount. Foreclosure serves as a mechanism for lenders to mitigate their losses when borrowers are unable to meet their financial obligations. It is important for homeowners to understand that foreclosure not only impacts their credit score but can also lead to a loss of their home, making it a significant event in the realm of real estate and lending.

The other answer choices discuss different processes that are not related to foreclosure: seizing property for unpaid taxes, transferring ownership without a sale, and recovering property after legal disputes, all of which do not capture the essence of a lender reclaiming a property due to non-payment of a mortgage.