What does the term “foreclosure” mean?

The term "foreclosure" specifically refers to the legal process through which a lender takes possession of a property when the borrower defaults on their mortgage by failing to make the required payments. This process typically involves several legal steps, beginning with the lender notifying the borrower of the default and pursuing actions to recover the amount owed. If the borrower does not rectify the situation, the lender can then move forward with the foreclosure, resulting in the sale of the property to recover the outstanding debt.

In this context, understanding foreclosure is vital for both borrowers and lenders, as it impacts the rights and responsibilities of both parties involved in a mortgage agreement. Other terms in the options provided do not align with the definition of foreclosure, making the second option the accurate choice.