What does Foreclosure entail for a borrower?

Foreclosure refers specifically to a legal process that occurs when a borrower defaults on their mortgage. This process allows the lender to take possession of the property that secures the loan in order to recoup their losses. When a borrower fails to make the necessary payments, the lender may initiate foreclosure proceedings, ultimately leading to the sale of the property.

This process typically involves a court judgment or a trustee's sale, depending on state law, and results in the property being sold at auction. It's important for borrowers to understand the implications of foreclosure, as it results in the loss of their home and can significantly damage their credit score. Unlike voluntary actions such as returning the house or methods aimed at easing payment burdens or renegotiating loan terms, foreclosure is a definitive legal remedy employed by lenders to recover owed amounts when a borrower defaults on their obligations.