Which term describes the legal process of reclaiming property when a borrower defaults on a mortgage?

The term that describes the legal process of reclaiming property when a borrower defaults on a mortgage is foreclosure. This process involves a lender taking control of a property from the borrower who has failed to meet the terms of their mortgage agreement. During foreclosure, the lender typically seeks to recover the outstanding loan balance through the sale of the property, as these loans are secured by the property itself.

Foreclosure is initiated after a set period of missed payments, which gives the lender the right to pursue legal action to acquire the property. It is a crucial legal mechanism in the context of secured lending, serving both to protect the lender's investment and to provide a method for dealing with defaults.

Other terms do not accurately capture this specific legal procedure. Liquidation refers to the process of selling off assets to pay debts, often used in the context of business bankruptcy rather than real estate. Eviction specifically pertains to the removal of tenants from a rental property and does not relate to mortgage defaults. Compensation generally refers to a payment made to offset losses, which is not applicable to the act of reclaiming property due to foreclosure.