Question 1

What is a "power of sale" in connection with a mortgage?

Accepted Answer

A power of sale is a provision in a mortgage or deed of trust that allows the lender to sell the property without going to court if the borrower defaults on the loan. This allows for a quicker and less expensive foreclosure process compared to a judicial foreclosure.

Question 2

Sharon borrowed $200,000 in order to purchase a home.She entered into a mortgage agreement with the lender,but the lender never recorded the mortgage.Sharon then borrowed additional money from a second lender and executed a mortgage,which the second lender recorded.Which of the following is true?

Accepted Answer

The first lender's unrecorded mortgage is still valid and enforceable against Sharon, but the second lender's recorded mortgage will take priority because it was recorded first. This is because the doctrine of "first in time, first in right" applies to mortgage priority in most jurisdictions. Therefore, the second lender's rights will be determined without regard to the first lender's mortgage.

Question 3

Mike has a long history of purchasing items on credit.At the present time,Mike has six secured creditors to whom he owes a total of $60,000 and two unsecured creditors to whom he owes $30,000.Mike recently was laid off from his job.It appears that he will have a difficult time finding a new job,and any job he finds will likely carry a salary lower than the job that he recently lost.What factors should a secured creditor consider in deciding whether to enter into a composition agreement? How would the analysis be different for unsecured creditors?

Accepted Answer

The answer of Mike has a long history of purchasing...

Question 4

If the non-recordation of a mortgage or deed of trust does not affect either the legality of the instrument between the mortgagor and the mortgagee or the rights and obligations of the parties,then why bother having a recording statute?

Accepted Answer

The answer of If the non-recordation of a mortgage or...

Question 5

Under a land sales contract,which of the following is true?

Accepted Answer

Under a land sales contract, credit is extended directly by the seller to the buyer, with the buyer not receiving a deed from the seller until the debt obligation is fully satisfied. This differs from a traditional sale where the buyer typically receives the deed at closing along with any mortgage or deed of trust to secure financing.

Question 6

A statute that prevents a mortgage holder from seeking recovery directly from the borrower any difference in the amount of debt owed and the amount that the property brings at a foreclosure sale is called a(n):

Accepted Answer

An antideficiency statute prohibits a mortgage holder from seeking deficiency judgments against a borrower after completion of a foreclosure sale. This means that the lender cannot pursue the borrower for any difference between the amount owed on the mortgage and the amount the property sold for. These statutes are designed to protect homeowners from further financial burden after losing their homes.

Question 7

Is a residential homeowner's right of redemption too great a protection for the homeowner? If someone has purchased a home at a foreclosure sale,why should the homeowner in default be able to redeem the property after the fact?

Accepted Answer

The answer of Is a residential homeowner's right of redemption...

Question 8

A mechanic's lien can be obtained on real property by a contractor who has not been paid and who has:

Accepted Answer

A mechanic's lien may be obtained by a contractor who has provided either materials or labor, or both, for the improvement of a property and has not been paid for it. The lien can be obtained on the real property where the work was performed. Providing materials or labor on personal property that was present on the real property at the time of providing services does not qualify for a mechanic's lien.

Question 9

Are the various requirements for filing mortgages and other security interests too burdensome on creditors? Do they work too much to the benefit of debtors?

Accepted Answer

The answer of Are the various requirements for filing mortgages...

Question 10

Nora and Jed borrow $700,000 from Your Bank to purchase a house near the lake and they (Nora and Jed)give a mortgage to Your Bank as collateral in order to secure the loan.Nora and Jed prove to be poor money managers and thereafter default on their loan to Your Bank.Your Bank begins foreclosure proceedings and proceeds to sell the home at a judicial sale.Paul and Penelope fall in love with the house and purchase it for $850,000.What if anything must Your Bank remit to Nora and Jed?

Accepted Answer

The answer of Nora and Jed borrow $700,000 from Your...

Question 11

The process by which a lender uses the secured property to satisfy a debt in default is called:

Accepted Answer

The process of using the secured property to satisfy a debt in default is known as foreclosure. The lender can take possession of the property or sell it to recover the outstanding amount owed by the borrower. Choices A, B, C, and D are not related to this specific process.

Question 12

What does a right of redemption allow in connection with a mortgage or deed of trust?

Accepted Answer

The right of redemption allows the borrower to recover their foreclosed property by paying off the related debt.

Question 13

Jack has a construction company that specializes in home remodeling and renovation.He enters into a contract with Sandra to remodel her basement.Sandra agrees to pay in three installments,the third of which is due at the time of completion.Sandra makes the first two payments on schedule but refuses to make the final one even though the job has been completed.To preserve his rights,Jack files against the property.What type of filing has Jack most likely done?

Accepted Answer

By filing against the property, Jack has most likely filed a mechanic's lien, which is a legal claim against the property that secures payment for work or materials provided during a construction project. This type of filing allows the contractor to force the sale of the property in order to collect payment for the work done. A mortgage, deed of trust, deficiency judgment, and foreclosure are all different types of legal actions related to property ownership and financing, but they are not directly related to a contractor's payment rights.

Question 14

Bernie purchases a house for $100,000.He puts $20,000 down,and borrows $80,000 from ABC Bank.ABC Bank does not record the mortgage.Bernie has expensive taste.He later goes to DEF Bank and obtains another $80,000 loan on the house.DEF records the mortgage.Bernie subsequently defaults on both mortgages.What are the rights of the banks?

Accepted Answer

DEF Bank has a superior claim to the house because it recorded the mortgage. Recording a mortgage provides public notice of the mortgage, which gives priority to the mortgage holder over subsequent lien holders. Therefore, DEF Bank would have the right to foreclose on the house and collect the outstanding debt from the sale proceeds. However, ABC Bank would still have a claim to any remaining proceeds after DEF Bank is paid since it has a prior mortgage, but it would not have the right to take the house itself.

Quiz 26: Creditor's and Debtor's Rights