foreclose

Foreclose is the legal process by which a lender terminates a borrower's right to ownership of a property that serves as collateral for a loan and initiates a sale to recover the outstanding debt. The process typically begins after the borrower defaults on the loan, such as by missing payments or violating other terms of the agreement. In many cases the lender may accelerate the loan, making the entire balance due immediately.

In the United States, foreclosures can proceed through judicial action or non-judicially, depending on the type of security instrument and state law. Judicial foreclosure involves court proceedings to obtain a judgment allowing the sale of the property. Non-judicial foreclosure, common under a deed of trust with a power of sale, proceeds without court action, conducted by a trustee or similar party. Some states recognize strict foreclosure, in which title may transfer without a sale if conditions are met. The property is typically sold at a public auction, with proceeds used first to cover costs, then the loan balance, and any surplus may go to the borrower. In some jurisdictions, lenders may pursue a deficiency judgment if the sale does not fully satisfy the debt.

Foreclosure can have serious consequences for the borrower, including a negative impact on credit scores and potential eviction. Redemption rights or reinstatement periods, if available, vary by jurisdiction. Alternatives to foreclosure include loan modification, forbearance, repayment plans, refinancing, or a deed in lieu of foreclosure, where the borrower transfers ownership to the lender to settle the loan. Foreclosure laws and procedures thus differ widely across regions.