What is the process called when a lender takes possession of a property due to loan default?

The process of a lender taking possession of a property due to loan default is known as foreclosure. This legal procedure allows lenders to reclaim their investment when a borrower fails to make the required mortgage payments. During foreclosure, the lender can take action to sell the property, typically through a public auction, to recover the amount owed on the loan.

Foreclosure serves as a protective measure for lenders, ensuring that they can attempt to regain their losses in the event of non-payment. It also follows specific legal protocols, which vary by state, including notification to the borrower and a defined timeline for the proceedings.

In contrast, other terms like judicial sale, short sale, and equity sale refer to different scenarios in real estate transactions. A judicial sale involves a property being sold after a court order, usually in the context of settling debts; a short sale occurs when a property is sold for less than the amount owed on the mortgage, typically to avoid foreclosure; and an equity sale refers to the selling of property during which the owner has significant equity, often willingly and without constraints of default.