What is the legal process called whereby a lender takes control of a property held by a borrower in default?

What is the legal process called whereby a lender takes control of a property held by a borrower in default?

• A. Realignment
• B. Foreclosure
• C. Repossession
• D. Liquidation

Answer: (B)

The legal process in which a lender takes control of a property from a borrower who has defaulted on their mortgage is known as foreclosure. This process allows lenders to recover the amount owed on the loan by selling the property, typically through a public auction. Foreclosure occurs when the borrower fails to make the required payments on the mortgage, violating the terms of the loan agreement. In response to this default, the lender initiates foreclosure proceedings, which can vary significantly from state to state. During this process, the borrower may have opportunities to remedy the default, such as making a late payment or negotiating new terms. The other options do not accurately represent this specific legal action. Realignment refers to reorganizing or adjusting something, which does not relate to the lending or property context. Repossession generally applies more to personal property like vehicles or goods, not real estate. Liquidation involves selling off assets to pay debts, but it does not specifically pertain to the legal control over a property in default. Thus, foreclosure is the precise term used in real estate law for this situation.

The legal process in which a lender takes control of a property from a borrower who has defaulted on their mortgage is known as foreclosure. This process allows lenders to recover the amount owed on the loan by selling the property, typically through a public auction.

Foreclosure occurs when the borrower fails to make the required payments on the mortgage, violating the terms of the loan agreement. In response to this default, the lender initiates foreclosure proceedings, which can vary significantly from state to state. During this process, the borrower may have opportunities to remedy the default, such as making a late payment or negotiating new terms.

The other options do not accurately represent this specific legal action. Realignment refers to reorganizing or adjusting something, which does not relate to the lending or property context. Repossession generally applies more to personal property like vehicles or goods, not real estate. Liquidation involves selling off assets to pay debts, but it does not specifically pertain to the legal control over a property in default. Thus, foreclosure is the precise term used in real estate law for this situation.