Final answer:
A lapsed homeowner's insurance can lead to default of the mortgage loan because it violates the terms of the mortgage agreement and increases the risk for both the homeowner and the lender.
Step-by-step explanation:
A lapsed homeowner's insurance can lead to default of the mortgage loan because it violates the terms of the mortgage agreement. When a homeowner fails to maintain homeowner's insurance as required by the lender, it increases the risk for both the homeowner and the lender. If a major loss, such as a fire or natural disaster, occurs and the home is not insured, the homeowner may not have the financial means to repair or rebuild the property. This can result in the homeowner defaulting on the mortgage loan because they are unable to fulfill their obligation to repay the loan.