As lenders we underwrite our loans conservatively to prevent any sort of default BUT its inevitable to happen. Some defaults may be minor (missed a payment, over the loan term etc...) while others may be worse (walked away from the project, seriously behind in payments, etc..) You can make a business decision on how you want to default your client/borrower but its important to have options.

Your loan package (prepared by a competent Attorney) should have everything in there to protect you. Your mortgage/deed of trust recorded as 1st lien position, promissory note outlining default actions, guarantee agreement to file judgements etc...

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