Oregon 30-Hour Real Estate Law Practice Test

What occurs during a foreclosure process?

1. The borrower receives automatic loan forgiveness

2. The lender auctions the property to recover debts

3. The property is sold to a third party at market value

4. The borrower renegotiates the loan terms

The correct answer is: The lender auctions the property to recover debts

During a foreclosure process, the lender typically auctions the property in order to recover the outstanding debts from the borrower. This process occurs when the borrower fails to meet the mortgage payment obligations, prompting the lender to take legal action to reclaim the property. The goal of the foreclosure auction is to sell the property quickly in order to recoup as much of the unpaid loan amount as possible. This response reflects a fundamental aspect of foreclosure, where the property is not simply returned to the borrower or forgiven; instead, it becomes a means for the lender to mitigate losses incurred from the default. The auction also allows other interested parties to bid on the property, potentially generating competitive bids that could help recover the remaining debt owed to the lender. This is distinct from the other options, where automatic loan forgiveness, selling at market value without an auction, or renegotiating terms do not typically occur during the foreclosure process. Instead, the focus is on the sale through auction to reclaim owed funds rather than any renegotiation or debt waiver.