The property pledged as security might be sufficient at the time the loan is made, yet if a large amount of unpaid interest accumulated, the security might not be great enough to cover both principal and interest. So likewise the owner might permit taxes and assessments to go unpaid. These liens are ahead of the mortgage and would consequently depreciate the security. To prevent the happening of these contingencies the default clause is inserted in the bond. Under the terms of this clause the total amount of the bond becomes immediately due if the interest is not paid within thirty days after it becomes due, or taxes or assessments remain unpaid for thirty days after they become due. If the principal of the loan be payable in instalments this clause should provide for default in such payments. This clause protects the lender, who can thereby check within a short period any wastage of his security. Should any default occur, he can foreclose on the property at the end of the stated grace period.

The mortgage given with the bond contains, in addition to the default clause, many other provisions for the protection of the lender and these are incorporated into the bond under the last sentence in the bond which begins "all of the covenants" etc. Occasionally the insurance clause is inserted in the bond, by the terms of which the borrower agrees to keep the property insured against fire for the benefit of the lender. The property is security for the loan. If it burned down the security would lose most of its value. Fire insurance protects against this contingency. Should there be a fire loss the insurance is payable to the lender to the extent of his loan and interest.