Right Of Foreclosure

Definition of 'Right Of Foreclosure'


A lender's ability to take possession of the property used to secure the loan it provided if the borrower stops making payments. Homeowners associations also have a right of foreclosure, which they can exercise if a homeowner fails to pay homeowners association fees and/or special assessments.

Investopedia explains 'Right Of Foreclosure'


For example, if John buys a house by obtaining an adjustable-rate mortgage from the bank and then he stops making his mortgage payments because his adjustable-rate mortgage resets and the monthly payments are too high, the bank will exercise its right of foreclosure. The bank then becomes the new legal owner of the property, and will sell the house to recoup its losses.


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