Typically, a purchaser of residential real estate pays for the property with funds that are obtained from a lender, called the mortgagee, through a mortgage transaction. In exchange for the funds, the purchaser, called the mortgagor, promises to repay the funds and gives the mortgagee a security interest in the property to secure the repayment. In the event that the mortgagor does not repay the funds as required by the mortgage document or is otherwise in default, the mortgagee may foreclose on the mortgage.

Foreclosure is a process by which a mortgagee can assert its rights to receive payment for the mortgage debt. The mortgage instrument contains the terms under which the debt is to be repaid as well as the conditions that constitute default. Conduct that constitutes default can include, among other acts, a failure to make payments on time, a failure to insure the mortgagee's interest in the premises, or a sale of the property. Depending on the language of the mortgage, any of these acts may be a default that can trigger a foreclosure.

If the mortgagor defaults, the mortgagee can sue to recover the remaining balance of the loan or it can foreclose on the mortgage. If the mortgagee forecloses, the property is sold by a judicial sale and the proceeds are applied against the remaining loan debt. If the proceeds are insufficient to cover the amount due, the mortgagee may obtain a deficiency judgment against the mortgagor. A deficiency judgment is subject to attack by the mortgagor if the selling price was so low as to shock the conscience. In such cases, a court may set aside the deficiency.

A mortgagor may, in some cases, have a statutory right to redeem the property. If a jurisdiction has enacted a redemption law, the mortgagor will be entitled to pay the price that was paid at the judicial sale within a specified time frame. The redemption time period usually begins to run from the date of the judicial sale, rather than from the date on which the foreclosure proceeding was brought; however, each jurisdiction may be different, so it is important to check the time that is allowed by the statute in the relevant jurisdiction.

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