In a mortgage, what effect does a power of sale clause have?

The power of sale clause is a provision within a mortgage agreement that allows the lender to sell the property without going through the court system if the borrower defaults on the loan. This non-judicial sale process is efficient because it bypasses lengthy and costly judicial foreclosure proceedings, allowing lenders to recover losses in a timely manner.

When a borrower defaults, the lender can take action to sell the property to recoup the outstanding debt without needing to file a lawsuit or go to court, which is characteristic of a judicial foreclosure. This ability to initiate a sale without judicial involvement lowers the overall costs and expedites the recovery process for the lender.

The other options provided do not accurately reflect the implications of a power of sale clause. For instance, enabling judicial foreclosure is not a function of this clause, as it specifically pertains to non-judicial foreclosure. While a power of sale clause may include the ability to sell the property through an auction, it does not mandate the process from the outset. Additionally, the clause does not directly relate to increasing interest rates upon default; those terms are typically outlined separately in the mortgage agreement.