What is the lender's procedure to recover the loan amount due to borrower default?

The procedure lenders utilize to recover the loan amount when a borrower defaults is foreclosure. This legal process allows a lender to take possession of the property that was used as collateral for the loan if the borrower fails to make their mortgage payments. Foreclosure involves the sale of the property at a public auction, where the proceeds are used to pay off the outstanding debt to the lender. This process ensures that lenders can recoup their investment and minimize potential losses resulting from the borrower’s failure to fulfill their repayment obligations.

In contrast, recession typically refers to the termination of a contract or agreement and does not apply in the context of recovering loans. Amortization is the process of gradually repaying a loan over time through scheduled payments and is unrelated to recovering funds after a default. Liquidation generally refers to the process of selling assets to settle debts, which is broader and not specifically related to real estate or foreclosure processes. Thus, foreclosure is the appropriate and established method for lenders to recover funds in the event of borrower default.