finance

default

Default is the failure to meet an obligation under a contract or loan, most commonly missing mortgage payments, but also failing to pay property taxes, keep insurance, or maintain the property as required. When a borrower defaults, the lender can usually invoke the acceleration clause, declaring the full balance due, and begin foreclosure if the default is not cured. Notice and cure periods vary by state.

Exam tip: Default triggers the acceleration clause, which leads to foreclosure. Default is not limited to missed payments; failing to pay taxes or insurance also counts.
Example: A homeowner misses four monthly payments; the lender sends a notice of default and accelerates the $210,000 balance.

1. The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

Answer & explanation

Answer: B. The acceleration clause lets the lender call the entire debt due on default. The alienation (due-on-sale) clause is triggered by transfer of the property.

Related terms & state variants

acceleration clause deficiency judgment equitable right of redemption foreclosure

Sources

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Last verified: 2026-10-23