If you provide capital to a lending pool, you should know exactly what happens when a borrower does not repay. Here is the process, step by step.
The recovery process
Default at maturity. There is no grace period. If a loan is not fully repaid by its due date, it is in default. Borrowers receive reminder emails 14 days, 5 days, and 1 day before maturity.
UCC notice. Before any sale, a formal disposition notice is issued under the UCC (the Uniform Commercial Code, the law governing secured lending). The borrower gets at least 10 days’ notice.
Public auction. After the notice period, the property token is sold at a public auction. How long it runs depends on the pool: legacy pools ran 24-hour auctions, and newer pools run 2-week auctions. Bids are in USDC, a stablecoin (a digital dollar that always equals $1), with a minimum increase of 2% per bid.
Recovery. Auction proceeds repay the outstanding debt and costs. Any surplus above that is returned to the borrower.
The borrower can prevent the auction by repaying in full before it starts. Partial payments do not stop the process. Once the auction starts, the borrower keeps the property only by being the winning bidder. In this model the pool does not take the land directly; recovery comes through a public sale, which keeps the process clean and market-priced.
Why the collateral is enforceable
Each property sits in its own trust with a deed recorded at the county, and the property token controls the trust. Transfers of the token to lending contracts are custody only; beneficial ownership stays with the borrower until the collateral is sold at public auction. The collateral interest is designed around UCC Article 12, the commercial-law framework for digital assets. The legal protections for lenders are documented in detail in the developer docs linked below.
Questions about a specific loan
If you are a depositor or lender with questions about a defaulted loan, email hello@fabrica.land or open the chat bubble in the corner.
Learn more:Loan defaults · Lender protections · UCC Article 12