Oregon 30-Hour Real Estate Law Practice Test

What is the primary purpose of a lender initiating a foreclosure action?

1. To sell the property to recover the amounts owed

2. To assist the borrower in refinancing

3. To increase the property market value

4. To offer the borrower a new mortgage

The correct answer is: To sell the property to recover the amounts owed

The primary purpose of a lender initiating a foreclosure action is to sell the property to recover the amounts owed. When a borrower defaults on a mortgage, the lender has a legal right to take possession of the property through foreclosure. This process allows the lender to repossess the property and then sell it, typically at a public auction or within the real estate market. The proceeds from the sale are used to pay off the outstanding debt owed by the borrower, including the mortgage balance and any accrued interest or fees. Foreclosure is a critical tool for lenders to manage risk and recover their investments when borrowers are unable to meet their mortgage obligations. This action ultimately serves the lender's financial interests, as they seek to minimize losses associated with defaults. The other options involve actions that do not align with the lender's primary motivation in a foreclosure scenario. Assisting a borrower in refinancing, increasing market value, or offering a new mortgage are not the goals of foreclosure; instead, they might be strategies employed before the need for foreclosure arises, typically focusing on maintaining or improving the client relationship rather than recovering debts.