A borrower signs a promissory note and executes a mortgage to a lender to secure the repayment of a loan. Unexpectedly, the borrower sells the property to a third party without the lender's knowledge or approval. The third party, upon taking possession, stops making payments on the loan. The lender initiates foreclosure proceedings against the property. What is the best explanation for the lender's right to foreclose in this scenario?
The enforceable debt obligation secured by the mortgage
The lender’s right to review property sales conducted without consent
The third party’s failure to accept responsibility for the mortgage payments
The lender’s option to cancel repayment terms upon ownership transfer
The enforceable debt obligation secured by the mortgage gives the lender a right to foreclose when the borrower or their successor fails to meet payment obligations. A mortgage acts as a security interest that binds the property to the repayment terms outlined in the promissory note. Ownership changes generally do not impact the lender’s security rights unless the new owner formally assumes the debt. Other answers are incorrect because they either overstate the lender's rights (e.g., suggesting they could simply void sales) or mischaracterize the effect of the transfer on the enforceability of the secured obligation.
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What is a promissory note?
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What is a mortgage in relation to a loan?
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