From Wikipedia: Foreclosure is the legal process in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that "the lender has foreclosed its mortgage or lien".
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The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States and many other countries, several types of foreclosure exist. Foreclosure by judicial sale, more commonly known as Judicial Foreclosure is available in every state and required in many, involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. In some fairly rare instances, foreclosures are filed in Federal courts.

Foreclosure by power of sale, which is also allowed by many states if a power of sale clause is included in the mortgage. This process involves the sale of the property by the mortgage holder without court supervision. It is generally more expedient than foreclosure by judicial sale. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. Historically, strict foreclosure was the original method of foreclosure.
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If a mortgage is taken, for instance, on a $10,000 property and monthly payments are required, the mortgage holder can demand the mortgagor make good on the entire $10,000 if the mortgagor fails to make one or more of those payments.
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The process of foreclosure can be rapid or lengthy and varies from state to state. In the United States, there are two types of foreclosure in most common law states. Using a "deed in lieu of foreclosure," or "strict foreclosure", the noteholder claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is subject to auction by the county sheriff or some other officer of the court. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). "Strict foreclosure" is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days' notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale.
A house that went through a foreclosure auction and failed to attract any acceptable bids may remain the property of the owner of the mortgage. If the mortgage is a non-recourse debt (which is often the case with residential mortgages), lender may not go after borrower's assets to recoup his losses. Lender's ability to pursue deficiency judgment may be restricted by state laws. Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but the borrower is still obligated to pay them off if they are not paid out of foreclosure auction's proceeds.
Some individuals and companies are engaged in the business of purchasing properties at foreclosure sales. [3] According to the detailed statistics the foreclosure rate (number of foreclosures available, see the picture) in the US is constantly growing and this situation is favorable for the foreclosure investment.

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