PSI New Jersey Real Estate State Practice Exam

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What term describes a seller being in default but allowed to pay off a mortgage before foreclosure?

Short sale
Foreclosure avoidance
Deed in lieu of foreclosure
Loan modification

The correct answer is: Foreclosure avoidance

The term that describes a seller being in default but allowed to pay off a mortgage before foreclosure is foreclosure avoidance. This situation typically occurs when a homeowner, facing financial difficulties, is given options by their lender to address the defaulted loan. Instead of proceeding with foreclosure, the lender may allow the homeowner to pay off the loan or come up with a repayment plan. This process serves to help the homeowner retain their property and avoid the negative consequences associated with foreclosure. In the context of real estate, foreclosure avoidance strategies aim to provide alternatives that benefit both the lender and the borrower, often involving payment plans, loan modifications, or other forms of assistance. By utilizing these options, the seller can prevent the completion of the foreclosure process while satisfying their mortgage obligations.