What is a foreclosure?

A foreclosure is a legal process initiated by a lender to take possession of a property when the borrower fails to make the required mortgage payments. This process typically occurs after several missed payments and involves the lender selling the property to recover the outstanding loan amount. The lender's action is based on the borrower's default, meaning they have not fulfilled their financial obligations as stipulated in the mortgage agreement.

In this context, the other options do not accurately define foreclosure. For example, refinancing a loan involves renegotiating the terms of an existing loan without transferring ownership of the property, which is entirely different from the foreclosure process. An auction of properties due to unpaid taxes pertains to a different legal scenario involving tax authorities, not lenders. Similarly, a negotiation process to restructure debt may occur outside of foreclosure proceedings but does not relate directly to the lender taking possession of the property due to non-payment. Thus, the definition that aligns with the foreclosure process is the one pertaining to the legal action taken by a lender to reclaim property following loan default.