Definition: The process by which a mortgagee (lender) takes back a property on which the mortgagor (borrower) has defaulted. A servicer may take over a property from a borrower on behalf of a lender. A property usually goes into the process of foreclosure if payments are more than 90 days past due.
Lenders use the debt yield ratio to evaluate the risk involved with lending money to a property owner. By definition, it is the return the lender would receive if the borrower defaulted on the loan and the lender had to foreclose on the subject property. Calculated in percentage points, it is the return the lender makes from the real estate after the foreclosure. Therefore, debt yield is inversely related to risk.