What might happen if a mortgagor defaults on a mortgage?

When a mortgagor defaults on a mortgage, the mortgagee, or lender, typically has several options to recover the outstanding debt. One commonly pursued remedy is seeking a judicial sale. This legal process allows the lender to sell the property through the court in order to recoup as much of the owed amount as possible. The process is carefully regulated to ensure that the mortgagor has the opportunity to pay off the debt or to receive any surplus funds from the sale after the debt is settled.

This approach provides the lender with a systematic and lawful way to handle the situation, aiming to minimize potential losses. It also protects the interests of both parties, as it involves judicial oversight.

On the other hand, the other options present scenarios that do not accurately reflect what typically occurs in the case of mortgage default. Issuing a refund of total payment or allowing an indefinite extension of the payment period would not typically be feasible or responsible actions for a lender. Additionally, the automatic cancellation of a mortgage by the court does not occur; a court must be involved to decide on the next steps following a default, which may include foreclosure proceedings or judicial sales.