Oregon 30-Hour Real Estate Law Practice Test

What action can a lender take if a borrower like Melissa has not paid her mortgage for several months?

1. Reinstate the loan terms

2. Offer a payment plan

3. Foreclosure proceedings

4. Sell the loan to another lender

The correct answer is: Foreclosure proceedings

When a borrower has not made mortgage payments for several months, the lender has several options, and initiating foreclosure proceedings is one of the most common actions taken. Foreclosure is a legal process through which the lender can recover the amount owed on a defaulted loan by selling or taking possession of the mortgaged property. It typically follows the lender's efforts to contact the borrower and negotiate a resolution, such as a payment plan or loan reinstatement. In cases where payments are consistently missed, and there seems to be no possibility of recovery through negotiation, foreclosure becomes the necessary course of action to protect the lender's financial interests. The foreclosure process allows the lender to recoup losses by selling the property at auction or through other means, depending on state laws and regulations. While options like reinstating loan terms or offering a payment plan are viable under certain circumstances, they are more often pursued to avoid foreclosure. Selling the loan to another lender is also a potential action, but it typically occurs before reaching the point of serious delinquency. Once a borrower is significantly behind on payments, initiating foreclosure is the most direct method for a lender to reclaim their funds.