Question

The clause in a mortgage document that permits a lender to declare the entire debt payable if the borrower defaults on loan payment is:

A. an alienation clause
B. a defeasance clause
C. an acceleration clause
D. a subordination agreement

Answer 1

The clause that allows a lender to demand the full mortgage debt in the event of a default is called an acceleration clause.

Step-by-step explanation:

The clause in a mortgage document that permits a lender to declare the entire debt payable if the borrower defaults on a loan payment is known as an acceleration clause. This clause is essential because it protects the lender by allowing the recovery of the balance owed if the borrower is no longer making payments according to the agreed terms. Without this clause, the lender would have to wait for the loan's natural maturity before being able to claim the remaining debt, which could be financially disadvantageous.

The correct answer to the question is C. an acceleration clause.