The process by which a lender exercises its power of sale under a mortgage that is in default is known as which of the following?

The process by which a lender exercises its power of sale under a mortgage that is in default is known as foreclosure. This term refers to the legal procedure through which the lender seeks to reclaim the property securing the mortgage because the borrower has failed to meet the obligations of the loan, typically by not making timely payments. During foreclosure, the lender can take possession of the property and sell it to recover the outstanding debt.

Foreclosure operates under specific legal frameworks and varies based on state laws, often culminating in an auction where the property is sold to the highest bidder. The key point is that foreclosure allows the lender to address the financial default by liquidating the asset that serves as collateral for the loan.

The other options do not pertain to this situation. A short sale involves selling the property for less than the amount owed on the mortgage with the lender's approval. Adverse possession refers to a person claiming ownership of land under certain conditions, typically through continuous and open possession. Condemnation is an exercise of eminent domain, allowing the government to take private property for public use, which is unrelated to mortgage defaults. Thus, the correct term clearly connects to the lender's rights when a borrower does not fulfill their contractual obligations under a mortgage.