The legal process by which a lender takes possession of a property after the borrower fails to make mortgage payments.
Full Definition
Foreclosure is the legal mechanism lenders use to recover their money when a borrower defaults on a mortgage. The process varies significantly by state — some states use judicial foreclosure (court-supervised), which takes 1–3 years; others use non-judicial foreclosure (power of sale), which can take 3–6 months. Before a lender can foreclose, they must typically exhaust loss mitigation options (forbearance, loan modification, short sale). Foreclosure severely damages credit scores (often 100–150 points) and the record remains for 7 years. Most loan programs impose waiting periods after a foreclosure before you can get another mortgage — 3–7 years depending on the program.
Related Terms
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