Gerald obtains a mortgage loan from State Bank to purchase a house for $600,000.Because Gerald makes a down payment of only $25,000,State Bank requires him to purchase mortgage insurance.After six months,Gerald defaults on the loan.State Bank can

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Since Gerald defaulted on the loan, State Bank has the right to repossess the house as collateral. Since Gerald had mortgage insurance, the insurer will reimburse State Bank for any losses incurred due to the default. Therefore, State Bank can repossess the house and receive reimbursement from the insurer.

Gerald Obtains a Mortgage Loan from State Bank to Purchase