What is a foreclosure?

A foreclosure is primarily recognized as a legal process that allows lenders to recover loan balances owed by borrowers when the borrower defaults on their mortgage payments. When a borrower fails to meet their loan obligations, the lender may initiate foreclosure proceedings to take ownership of the property that acts as collateral for the loan. This process is governed by state laws and typically involves a public auction where the property is sold, and the proceeds are used to pay off the remaining loan balance.

The other options do not accurately depict foreclosure. Selling a borrower's home for profit is a consequence that may occur as a result of the foreclosure process, but it is not the definition of foreclosure itself. Refinancing existing loans involves obtaining a new loan to replace an old one, which does not relate to recovering balances from defaulting borrowers. Lastly, securing additional investments on a property is unrelated to foreclosure, as it refers to enhancing the financial capacity or equity of a property rather than recovering loan balances due to defaults.