Question

1. When a borrower cannot make timely payments of principal and interest the following steps will occur in the following order:

1. technical default, cure period, foreclosure, workout
2. workout, cure period, monetary default, foreclosure
3. foreclosure, workout, cure period, technical default
4. monetary default, cure period, workout, foreclosure

Answer 1

Non payment of any scheduled payment is known as mnetary default. So that will be the first step.

Once the borrower has defaulted, he is given a grace period during which no penalty is charged if the borrower makes the payment within this time. This grace period is known as the cure period.

Borrower and lender try to renegotiate the terms of loan so that the borrower still gets a chance to repay the loan and avoid foreclosure.

If the borrower still defaults, the collateral is foreclosed, i.e. the lender takes hold of the collateral and tries to recover the loaned amount by selling it.

So the correct option is d. monetary default, cure period, workout, foreclosure