What is the legal process called when a borrower loses interest in mortgaged property due to default?

The legal process referred to when a borrower loses interest in mortgaged property due to default is known as foreclosure. In this process, the lender initiates legal action to reclaim the property after the borrower fails to meet the mortgage obligations, typically by not making required payments.

During foreclosure, the lender has the right to sell the property to recover the amount owed on the loan. This procedure not only extinguishes the borrower's rights to the property but also allows the lender to recoup its losses. Foreclosure laws vary by state, with some states requiring judicial foreclosure (court involvement) and others allowing non-judicial foreclosure (without court intervention).

Eviction pertains specifically to the removal of a tenant from rental property, not the loss of interest in property due to a mortgage default. Repossession usually relates to personal property rather than real estate and would refer to the lender reclaiming the property outside of the formal foreclosure process. A judgment can be a court ruling on a legal matter but is not the specific process where a borrower loses interest in property due to default. Thus, foreclosure is the precise term that describes this situation within real estate transactions.