Question

After closing escrow on the purchase of a house with a 20% down payment and a new mortgage loan, the buyer makes no further payments. What clause would the lender exercise? Select one:

a. Novation
b. Alienation
c. Acceleration
d. Habendum

Answer 1

The lender would exercise the acceleration clause, which requires the borrower to repay the entire loan balance immediately upon default of mortgage payments.

Step-by-step explanation:

After closing escrow on the purchase of a house with a 20% down payment and then failing to make any further mortgage loan payments, the clause the lender would exercise is the acceleration clause. This clause allows the lender to demand the immediate repayment of the entire loan balance remaining if the borrower defaults on their mortgage payments. Since the buyer in this scenario has not made any further payments, they have defaulted on the loan, and this would result in the acceleration of the loan, requiring them to pay the entire balance.