Question 26

The lender may accelerate the balance of the loan.

When a borrower fails to make two consecutive payments on a loan secured by a mortgage, the lender has the option to accelerate the loan, meaning they can demand the entire remaining balance to be paid immediately.

A) execute a deed in lieu of foreclosure

Executing a deed in lieu of foreclosure is a process where the borrower voluntarily transfers the property to the lender to avoid foreclosure. While this can occur after payment failures, it is not the immediate action the lender may take upon the occurrence of two missed payments.

B) evict delinquent tenants at the building

Evicting tenants is not a direct action related to the borrower's failure to make mortgage payments. This action pertains to landlord-tenant relationships and would not be initiated solely based on the mortgage default.

C) accelerate the balance of the loan

Accelerating the balance of the loan is a standard right for lenders when a borrower defaults on payments. This action allows the lender to require the total outstanding amount of the loan to be paid immediately, thus protecting their financial interest in the property.

D) appoint a receiver for the property

Appointing a receiver is a more drastic measure that may occur in cases where the property is not being properly managed or risks financial loss, but it is not the immediate response to two missed payments. This action is typically reserved for more severe circumstances.

Conclusion

Accelerating the balance of the loan is a direct and common response to the borrower's failure to make payments, allowing the lender to safeguard their investment. Other options, such as executing a deed in lieu or appointing a receiver, may be considered later but are not the primary course of action immediately following two missed payments. Thus, option C clearly stands out as the correct response in this scenario.