Question 1

James and Debra Reid purchased a home for $623,000 in January 2014. They put down $62,300 and financed the remainder with Fifth Third Bank. Fifth Third Bank recorded its mortgage on February 1, 2014. On March 31, 2014, the Reids purchased a swimming pool and the pool contractors, Cristoria Pools, financed the construction for $45.000. Cristoria recorded a second mortgage on the property on April 15, 2014.
On December 15, 2014, the Reids sold their house to the Griffins for $720,000. The Griffins put $120,000 down and agreed to pay the Reids for the existing mortgage in wrap-around. The mortgage balance at the time of the sale was $619,000. The balance on the Cristoria mortgage was $42,000. On August 15, 2015, the Griffins defaulted on their payments. The Reids had already purchased another home and were unable to make the payments on the home. Fifth Third Bank foreclosed on the mortgage.
-Who has first priority on the sales proceeds after expenses are paid?

Accepted Answer

Fifth Third Bank has first priority on the sales proceeds after expenses are paid because it recorded its mortgage first, establishing its lien as the senior lien on the property.

Question 2

James and Debra Reid purchased a home for $623,000 in January 2014. They put down $62,300 and financed the remainder with Fifth Third Bank. Fifth Third Bank recorded its mortgage on February 1, 2014. On March 31, 2014, the Reids purchased a swimming pool and the pool contractors, Cristoria Pools, financed the construction for $45.000. Cristoria recorded a second mortgage on the property on April 15, 2014.
On December 15, 2014, the Reids sold their house to the Griffins for $720,000. The Griffins put $120,000 down and agreed to pay the Reids for the existing mortgage in wrap-around. The mortgage balance at the time of the sale was $619,000. The balance on the Cristoria mortgage was $42,000. On August 15, 2015, the Griffins defaulted on their payments. The Reids had already purchased another home and were unable to make the payments on the home. Fifth Third Bank foreclosed on the mortgage.
-Who has second priority after expenses are paid?

Accepted Answer

Cristoria Pools has second priority after expenses are paid because they recorded a second mortgage on the property after Fifth Third Bank's first mortgage.

Question 3

James and Debra Reid purchased a home for $623,000 in January 2014. They put down $62,300 and financed the remainder with Fifth Third Bank. Fifth Third Bank recorded its mortgage on February 1, 2014. On March 31, 2014, the Reids purchased a swimming pool and the pool contractors, Cristoria Pools, financed the construction for $45.000. Cristoria recorded a second mortgage on the property on April 15, 2014.
On December 15, 2014, the Reids sold their house to the Griffins for $720,000. The Griffins put $120,000 down and agreed to pay the Reids for the existing mortgage in wrap-around. The mortgage balance at the time of the sale was $619,000. The balance on the Cristoria mortgage was $42,000. On August 15, 2015, the Griffins defaulted on their payments. The Reids had already purchased another home and were unable to make the payments on the home. Fifth Third Bank foreclosed on the mortgage.
-Who has third priority after expenses are paid?

Accepted Answer

The Reids have third priority after expenses are paid because the first priority goes to the primary mortgage holder (Fifth Third Bank), followed by the second mortgage holder (Cristoria Pools). The Reids, as the sellers holding the wrap-around mortgage, would be next in line.

Question 4

Suppose the mortgage sale brings $600,000. Fifth Third Bank wishes to recover the deficiency of the amount due on the mortgage. Which parties are personally liable on the mortgage loan?

Accepted Answer

The Reids, as the original borrowers, are typically personally liable for the mortgage loan unless they have been released from liability or the loan has been assumed by another party.

Question 5

If there is only $600,000 left for distribution to creditors, what happens to Cristoria's loan?

Accepted Answer

Cristoria will have to pursue a personal judgment against the Reids because, typically, if the proceeds from a foreclosure sale are insufficient to cover all debts, creditors like Cristoria, who may hold secondary positions or unsecured loans, must seek personal judgments against the borrowers (the Reids in this case) to recover the remaining debt.

Question 6

What rights do the Reids have against the Griffins?

Accepted Answer

The Reids have a right to claim for breach of contract if the Griffins fail to fulfill their obligations as per the agreement between them.

Question 7

After the property is sold in foreclosure on a mortgage, suppose that the Reids are able to come up with the cash for the mortgage pay-off within 45 days of foreclosure. Which of the following is correct?

Accepted Answer

The Reids can redeem the property by paying off the mortgage within the redemption period, which typically involves paying the lender and any other parties with a claim, such as Cristoria.

Question 8

Which of the following is not a part of the Uniform Nonjudicial Foreclosure Act?

Accepted Answer

The answer of Which of the following is not a...

Question 9

A piggyback mortgage:

Accepted Answer

A piggyback mortgage is a second mortgage taken out at the same time as the first mortgage to cover part of the down payment, often to avoid paying private mortgage insurance (PMI).

Question 10

Under a hybrid adjustable mortgage:

Accepted Answer

A hybrid adjustable-rate mortgage starts with a fixed interest rate for a set period, after which it can adjust periodically based on changes in a reference interest rate.

Question 11

Under a negative amortization loan, a mortgagor:

Accepted Answer

Negative amortization occurs when the mortgage payments are not covering the interest portion of the loan, causing the loan balance to increase rather than decrease. This often happens in the early years of certain types of loans where the borrower is allowed to make lower payments, with the understanding that the unpaid interest will be added to the principal balance.

Question 12

A mortgage default is defined as:

Accepted Answer

A mortgage default occurs when the mortgagor (borrower) fails to comply with any of the terms agreed upon in the mortgage contract, which can include missing payments, failing to maintain property insurance, or not paying property taxes, among other conditions.

Question 13

When a debtor returns to the original lender and requests help with loan modification, the process is called:

Accepted Answer

A workout is the correct term for when a debtor returns to the original lender to request help with loan modification. It involves renegotiating loan terms to make it easier for the borrower to make payments.

Question 14

The Hope for Homeowners Act:

Accepted Answer

The Hope for Homeowners Act was designed to help homeowners avoid foreclosure by allowing the Federal Housing Administration (FHA) to refinance certain loans where borrowers were struggling to make payments. It did not dissolve Fannie Mae and Freddie Mac, nor is it the same as the TARP program, and it does have homeowner requirements beyond just mortgage debt.

Question 15

Which of the following is not true about the TARP program?

Accepted Answer

The Troubled Asset Relief Program (TARP) was designed to help stabilize the financial system during the 2008 financial crisis by purchasing troubled assets from financial institutions, among other measures. It indirectly helped lenders by providing them with liquidity and stabilizing the financial system, contrary to option D which suggests it did not help lenders.

Question 16

Underwater means:

Accepted Answer

Being "underwater" on a mortgage means that the mortgagor (homeowner) owes more on the mortgage than the current market value of the home. This situation can occur due to a decline in the property's value or an increase in mortgage debt.

Question 17

The TILA-RESPA Integrated Disclosure Process:

Accepted Answer

The TILA-RESPA Integrated Disclosure Process indeed allows for a rescission period of up to three years if the lender fails to comply with its requirements. This is a consumer protection measure designed to ensure that lenders provide clear and accurate disclosures about the loan terms and costs.

Question 18

The ATR requires lenders to:

Accepted Answer

The Ability-to-Repay (ATR) rule requires lenders to make a reasonable, good faith determination of a consumer's ability to repay any residential mortgage loan, and the standards for doing so are meant to ensure that borrowers are offered mortgages they can afford.

Question 19

American Savings and Loan Association (American) held a first deed of trust on certain income‑producing property. The deed of trust had a "due‑on‑sale" clause. American permitted several transfers without requiring an increase in the interest rate due on the underlying obligation.
Mr. Witter was one of the transferees of the property and he had defaulted on the American deed of trust as well as on a second deed of trust held by Mr. Master (Mr. Witter's seller).
American permitted Master to foreclose with the understanding that after Master acquired title to the property, there would be no increase in interest rates for a limited period during which Master would dispose of the property.
Master failed to inform American that when he acquired title, he entered into an agreement with Mr. Medovi and carried a second deed of trust on the property. Medovi's broker, Mr. Glick, carried a third deed of trust on the property.
When American discovered Master's action, it told Medovi he could assume the loan provided the interest rate was increased to market levels. Medovi refused to pay, and American commenced foreclosure.
Did American act properly? Why or why not?

Accepted Answer

The answer of American Savings and Loan Association (American) held...

Question 20

?Bishop Estate is the fee simple owner and was the lessor of two lots of commercial real property located in Kaka'ako, Hawai'i (the Kaka'ako Properties). Bishop Estate leased each lot for a 40-year term. Bishop Estate had pledged the lots in a mortgage to several different lenders and has defaulted on those loans. The lenders have stepped in and are collecting the rents from the two tenants. Bishop Estate objects because there has been no foreclosure. Can the lenders take the rents- Will the

Accepted Answer

The answer of ?Bishop Estate is the fee simple owner...

Quiz 15: Financing in the Transfer of Real Estate