What action is typically taken if a borrower defaults on their mortgage?

When a borrower defaults on their mortgage, the typical action taken by the lender is to initiate foreclosure proceedings. This legal process allows the lender to reclaim the property used as collateral for the mortgage loan. Foreclosure occurs when a borrower fails to make the required payments, and the lender must take steps to protect its financial interest.

Foreclosure serves as a means for the lender to recover the balance owed on the mortgage by selling the property, and it involves several steps, including notifying the borrower of the default and often providing a period during which the borrower may try to remedy the situation by catching up on overdue payments. If the borrower cannot resolve the default, the property will be sold at auction or through other means to recover the lender's investment. This process illustrates the importance of fulfilling mortgage obligations and the serious consequences that can arise from defaulting.

The other actions listed, such as refinancing the loan at a lower rate, forgiving the loan amount, or providing additional loans, are generally not associated with situations where a borrower is in default. Refinancing typically requires a borrower to have a good credit standing, while forgiving a loan is an uncommon practice, as lenders need to recover their losses. Providing additional loans is also unlikely, as lenders generally do not extend