What does the term 'foreclosure' refer to in real estate?

Foreclosure refers specifically to a legal proceeding initiated by a lender or servicer to enforce a lien on a property when the borrower fails to fulfill their mortgage obligations, typically by not making the required payments. When a borrower defaults on their mortgage, the lender has the right to take possession of the property. This process allows the lender to recover the outstanding loan amount by selling the property, typically at a public auction.

In a foreclosure, the legal framework ensures that the lender can reclaim the property to mitigate their financial losses due to the borrower’s default. This is distinct from renegotiating mortgage terms, which is aimed at modifying the existing agreement, or arrangements for temporary property use, which involve leasing or renting. Securing a loan also does not pertain to foreclosure; it refers to the process of obtaining financing, often through the creation of a mortgage, rather than the enforcement of that mortgage due to default.