Foreclosure is the legal process that a lender follows to repossess a home when mortgage payments are not being made as promised.
When a borrower takes out a mortgage, they give their lender a security interest in the home to secure the loan. If loan payments are not being made as promised, the lender has the right to repossess the property, but must do so through foreclosure proceedings.
In some states, foreclosure occurs outside of the court system, called non-judicial foreclosure. In other states foreclosures are processed through the courts. The foreclosure process differs by state, and there are a variety of timelines and notices that must be followed.
At the end of the process, the lender will attempt to sell the home at a foreclosure auction. If the property sells at auction, the new owner takes possession of the home and evicts the previous owner, if they still live there. If the property does not sell at auction, ownership of the property reverts to the bank and the property becomes a REO. The bank will also evict the previous owner and will eventually try to sell the home on the market.