National curriculum lesson 73 · Financing

Loan Clauses and Default Remedies

Loan clauses allocate rights before and after default. Acceleration makes the full balance due after a stated event. An alienation or due-on-sale clause can make the balance due upon transfer. Defeasance requires release when debt is satisfied. Prepayment language governs early payoff, while subordination changes lien priority. Assumption and subject-to purchases create different buyer liability.

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Last reviewed August 2, 2026. Editorial standards.

What is the exam-ready answer?

Official syllabus mapping for Loan Clauses and Default Remedies
Roadmap lesson	73 of 500
Official syllabus topic	Loan Clauses and Default Remedies
Official PSI area	Financing
Published area weight	10% of the 100-question national portion
Exam portion	National salesperson portion
Source edition	PSI Georgia Candidate Information Bulletin dated July 1, 2026
Last verified	August 2, 2026

The Rule

PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.

Complete lesson

Read each concept as part of one decision system. The exam often gives one accurate statement and three statements that belong to a nearby concept.

Acceleration and due on sale

Acceleration follows a specified default or event under the documents and law. Due-on-sale language addresses transfer rather than ordinary missed-payment default.

Defeasance and prepayment

Defeasance requires the security interest to be released when the secured obligation is satisfied. A prepayment clause states whether and how the borrower may pay early and whether a permitted charge applies.

Subordination, assignment, and novation

Subordination changes priority. Assignment transfers contractual rights. Novation substitutes a new party or obligation and releases the replaced party when validly agreed.

Assumption and subject to

In an assumption, the buyer agrees to become liable on the debt, subject to lender and contract terms. A subject-to buyer takes title with the lien remaining but does not automatically promise the lender to pay the seller's debt.

Decision rule

Identify whether the fact changes maturity, transfer rights, lien priority, creditor identity, or personal liability.

Georgia-specific distinction

Georgia security deeds often contain power-of-sale and default provisions. Foreclosure rights and procedures depend on the actual documents and Georgia law; a real estate licensee should not offer legal conclusions about cure, deficiency, or enforceability.

Worked example

Scenario. A buyer takes title while the seller's loan remains in place, but the lender never releases the seller and the buyer makes no promise to the lender.

Reason it through. The lien remains attached, yet the facts do not create buyer personal liability through assumption or novation.

Answer. This is a subject-to transaction, and the seller may remain personally liable.

Common exam traps

Confusing acceleration with due on sale
Calling subordination a payoff
Treating subject to as assumption
Assuming novation without creditor agreement

Original practice questions with detailed explanations

These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.

Question 1

Which clause can make the full balance due after default?

A. Acceleration
B. Defeasance
C. Habendum
D. Subordination

Show answer and explanation →

Answer: A. Acceleration

Acceleration advances maturity of the entire debt after the triggering event.

Question 2

Which clause changes lien priority?

A. Prepayment
B. Subordination
C. Alienation
D. Defeasance

Show answer and explanation →

Answer: B. Subordination

A subordination agreement places one interest behind another in priority.

Question 3

Who becomes personally liable under a true loan assumption?

A. The buyer who assumes, subject to the agreement
B. No one
C. Only the appraiser
D. The county

Show answer and explanation →

Answer: A. The buyer who assumes, subject to the agreement

Assumption includes the buyer's agreement to pay the debt, unlike taking title merely subject to the lien.

Mastery tracking

Mark this lesson mastered only when every statement is true.

State the direct answer and decision rule without notes.
Explain every core concept in plain English.
Solve the worked example after changing one important fact.
Identify the Georgia distinction before reading answer choices.
Answer all three questions correctly and reject every distractor.
Repeat the topic in mixed practice on a later day.

Recommended next lesson

Continue with Conventional and government loan programs. Lessons 74 through 76 compare conventional, FHA, VA, USDA, conforming, and nonconforming financing.

Return to the Financing hub to see every official branch and the complete lesson sequence for this content area.

Loan Clauses and Default Remedies questions

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Last reviewed August 2, 2026. Editorial standards.

Is Loan Clauses and Default Remedies on the Georgia real estate exam?

Yes. It belongs to PSI's Financing content area, which is 10% of the 100-question national portion. PSI publishes content-area weights, not a guaranteed question count for this individual lesson.

What is the main rule for Loan Clauses and Default Remedies?

Identify whether the fact changes maturity, transfer rights, lien priority, creditor identity, or personal liability.

What Georgia-specific distinction should I remember?

How do I know I have mastered this lesson?

Explain the rule without notes, solve the worked example again with changed facts, answer all original questions correctly, explain every distractor, and repeat mixed practice on a later day.