Collateral on Owner Occupied Home how to structure deal HELP

[Neil P.]

I am trying to structure a deal between a buyer and a seller.

Borrower is giving up his house as collateral.  Owner Occupied.

House worth- 600k

Borrower is looking for 400k 25% interest 2 years.

Lender- is ready to give 400k however he is concerned about the owner occupied.  He is afraid if the borrower defaults that the borrower can still stay in the home.

Questions: 

1.  Whats the best way to structure this the borrower is open to make the lender feel as comfortable as possible.

2.  What happens if the default does happen?  How long does it take to recover the property for the lender?