Humber/Ontario Real Estate Course 4 Exam Practice

If a buyer secures a mortgage with a lender and defaults on the loan, which party typically forecloses on the property?

1. The attorney representing the buyer.

2. The lender holding the mortgage.

3. The mortgage insurer, if applicable.

4. The real estate agent representing the buyer.

The correct answer is: The lender holding the mortgage.

When a buyer secures a mortgage and subsequently defaults on that loan, the lender holding the mortgage is typically the party that initiates the foreclosure process. This is because the lender has a legal claim to the property as collateral for the loan. When the buyer fails to meet their payment obligations, the lender is entitled to recover the funds lent by taking possession of the property through foreclosure. The lender must follow specific legal processes to foreclose, which varies by jurisdiction, but the fundamental principle remains that they have the right to enforce the mortgage contract to protect their financial interests. This might involve filing legal documents in court to reclaim the property, ultimately allowing them to sell it and recoup their losses. Other parties involved in the transaction, such as an attorney, mortgage insurer, or real estate agent, do not have the authority to foreclose since they lack the direct financial stake in the mortgage agreement. The attorney might represent the buyer or lend assistance in legal matters, but does not handle foreclosure on behalf of the lender. Similarly, mortgage insurers provide insurance to lenders against defaults, but they do not engage in the foreclosure process themselves. Real estate agents facilitate transactions but do not have any claim to the property that would allow them to foreclose.