Foreclosure

Foreclosure is the legal process a lender uses to take and sell a property after the borrower defaults on the loan secured by it. For a DSCR lender, the property is the main source of repayment, so foreclosure is how the loan is recovered when the rent stops covering the payment.

States use either judicial foreclosure, which runs through the courts, or non-judicial foreclosure under a power of sale in a deed of trust. The timeline ranges from a few months to well over a year depending on the state and process.

Most DSCR loans are made to an LLC with a personal guarantee from the owner, so a shortfall after the sale can follow the guarantor. That differs from nonrecourse debt, where the lender's claim ends with the property. A healthy DSCR at purchase is the cheapest protection against ever getting here.

Further reading: Foreclosure on Wikipedia.