What does the term "foreclosure" refer to?

The term "foreclosure" specifically refers to the legal process through which a lender takes control of a property after the borrower fails to make the required mortgage payments. This process allows the lender to recover the outstanding debt by selling the property typically through a public auction. When homeowners default on their mortgage, the lender initiates foreclosure proceedings to reclaim the property, as it serves as collateral for the loan.

Understanding this term is essential for housing counselors, as they often assist clients in avoiding foreclosure or navigating the process if they are at risk of losing their home. The implications of foreclosure are significant, affecting not only the borrower's credit score but also their ability to purchase a home in the future.

In contrast, the other options describe different concepts that do not pertain to the legal recovery of the lender's investment through property control.