If insurance coverage lapses and default occurs, which remedy might the lender pursue?

• A. Forgive the debt.
• B. Extend the policy without notice.
• C. Accept delayed reinstatement.
• D. Exercise remedies for default if permitted under the agreement.

Answer: (D)

Remedies for default are defined in the loan agreement and can only be used if the contract allows them. When insurance coverage lapses and a default occurs, the lender’s recourse is to act according to those authorized remedies. Forgiving the debt isn’t a typical lender action and would require a separate arrangement. Extending the policy without notice isn’t something the lender enforces, since policy terms are set by the insurer and borrower. Accepting delayed reinstatement isn’t a lender remedy either. The lender’s viable option is to exercise remedies for default if permitted under the agreement, which could include actions like acceleration or other enforcement steps described in the documents.