What is defined as 'foreclosure'?

Foreclosure is specifically defined as the legal process by which a lender takes possession of a property due to the borrower's failure to make mortgage payments. This process typically occurs after a borrower has defaulted on their mortgage loan, and it allows the lender to reclaim the property to recover the outstanding debt. This definition is critical in real estate and legal contexts as it delineates the rights of both the lender and the borrower in situations where financial obligations are not met.

The other choices do not accurately encapsulate the definition of foreclosure. Selling a property to pay back a loan could be a part of the foreclosure process, but it doesn’t fully encompass the legal aspects involved. A financial arrangement to avoid property taxes does not relate to the process of foreclosure at all. Lastly, a form of property insurance against loss is unrelated to foreclosure, as it deals with protection against risks rather than the recovery of a loan through possession of property.