Q: Can a lender refuse to do an inspection because current month's payment is delinquent? Lender says loan is in default.
According to contract terms, if payment is made after the 15th, a 10% penalty is due with payment. All (7) payments have been made and accepted. Lender/Inspector stated on "April 19th" he will not inspect the project to fund the draw because the loan is in default. There is a 15 day grace period. Four days after the 15th, Lender/Inspector is saying the loan is in default. My position is the payment is delinquent. The loan is not in default. Default is defined in the contract and it does not mention delinquency of payment. I believe the lender has breached the contract. This is a loan secured by real property.
A: Go back to the signed loan agreement. You may find language that spells out that a certain number of delinquent payments will result in a default status. Another phrase to watch for is one which allows the Lender to call the loan in default whenever the Lender "... in good faith deems itself insecure." Consistent delinquency might rise to the level of either or both of these standards.
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