Question: What exactly is foreclosure?

Answer: the free dictionary at: http://www.thefreedictionary.com/foreclosure

defines the term "foreclosure" as follows:

fore·clo·sure <javascript>  (fôr-klzhr, fr-)  noun.  The act of foreclosing, especially a legal proceeding by which a mortgage is foreclosed.

The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2003. Published by Houghton Mifflin Company. All rights reserved.

foreclosure

-Ologies & -Isms. Copyright 2008 The Gale Group, Inc. All rights reserved.

So we see that foreclosure is an act or a series of acts, part of a legal proceedure, started, "...usually for reason of delinquency in mortgage payments."

A mortgage is a contract in which a lender lends, a borrower borrows and the borrower puts up real estate as collateral, as a guarantee for the loan.

If the borrower makes the agreed-on payments on time, there is no problem. But, if for some reason (any reason) the borrower does not make the payments on time, the borrower will be said to be in default under the terms of the contract.

The lender wants to be paid. His first choice is to get paid by the lender. If the lender defaults and does not pay the lender as agreed, then under the terms of the mortgage, the lender has the right to legally cause the property to be sold at public auction to pay the debt.

If the property sells for more than the loan amount, the balance usually goes to the borrower, the original owner of the property.

If the property sells for less than the loan amount, the borrower will still owe the lender the balance.

If no one makes an offer, no one bids on the property, or if the bids are low, the lender/mortgage holder has the right to bid on the property in its own name. The lender can bid up to the full amount of the original loan plus costs and accrued interest. In that way the lender can get clear title to the property and will be its new owner.