Deck 26: Credit, Mortgages, and Debtors Rights

Question 1

An unsecured creditor is a creditor who has to rely on collateral to secure payment.

Answer 1

False

Question 2

When is a creditor a secured creditor?

A) when the creditor has been guaranteed payment by a trustee
B) when the creditor gives a loan without security
C) when the creditor has been paid back his or her debt
D) when the creditor has a security interest in collateral

Answer 2

D

Question 3

An arrangement where an owner of real property borrows money from a lender and pledges the real property as collateral to secure the repayment of the loan is known as a(n) ________.

A) consignment
B) foreclosure
C) mortgage
D) assignment

Answer 3

C

Question 4

Credit that does not require any collateral to protect the payment of the debt is referred to as ________.

A) unsecured credit
B) secured credit
C) fair credit
D) equal credit

Question 5

The function of collateral is to secure payment of the loan.

Question 6

Which of the following is true of a deed of trust?

A) The legal right of the property is with the creditor until payment.
B) The legal rights to possession of real property lie with a trustee.
C) The trustor has legal rights to possession of the real property.
D) The deed of trust is a two-party instrument.

Question 7

A collection action against a debtor who is judgment proof is not likely to be successful.

Question 8

Which of the following real property transactions places legal title in real property with a trustee?

A) land sales contract
B) garnishment
C) deed of trust
D) mortgage

Question 9

Roundwell Motors purchases a manufacturing plant for $15 million, pays $5 million in cash as down payment, and borrows the remaining $10 million from Home Providence Bank. To secure the loan, Roundwell gives the plant as collateral to Home Providence Bank. What kind of collateral arrangement is in place between Roundwell Motors and Home Providence Bank?

A) a mortgage
B) a garnishment
C) a land sales contract
D) an accommodation

Question 10

The property on which a security interest is taken is called collateral.

Question 11

Unsecured credits require collateral to protect the payment of the debt.

Question 12

A ________ is an instrument that evidences a borrower's debt to the lender for a real property.

A) note
B) consignment
C) collateral
D) deed of trust

Question 13

In a transaction involving the extension of credit, there are two parties - the creditor and the lender.

Question 14

Credit that requires collateral, which ensures payment of the loan, is referred to as ________.

A) unsecured credit
B) secured credit
C) equal credit
D) fair credit

Question 15

In a transaction involving the extension of credit, there are two parties - the creditor and the debtor.

Question 16

A ________ is an instrument that gives a creditor a security interest in the debtor's real property that is pledged as collateral for a loan.

A) credit report
B) letter of credit
C) remittance advice
D) deed of trust

Question 17

If the debtor is judgment proof, the debtor has little or no property and income, thus the creditor may never collect.

Question 18

Ashton borrows $25,000 from Amanda. Amanda lends the money to Ashton without taking an interest in collateral for the loan. Amanda is relying on Ashton's credit standing when she makes the loan. What kind of creditor is Amanda?

A) an unsecured creditor
B) a secured creditor
C) an administrative claim creditor
D) a post-petition creditor

Question 19

Roundwell Motors purchases a manufacturing plant for $15 million, pays $5 million in cash as down payment, and borrows the remaining $10 million from Home Providence Bank. To secure the loan, Roundwell gives the plant as collateral to Home Providence Bank. If Roundwell defaults on their payment, what is the recourse available to Home Providence to recover the loan?

A) buy the plant from Roundwell
B) return it to Roundwell
C) foreclose on it
D) hand it over to the government

Question 20

The party borrowing money is usually called a ________.

A) creditor
B) mortgagee
C) debtor
D) beneficiary

Question 21

A legal procedure by which a secured creditor causes the judicial sale of the secured real estate to pay a defaulted loan is known as ________.

A) attachment
B) accountability
C) land sales contract
D) foreclosure sale

Question 22

Which of the following is true of the right of redemption for mortgages?

A) The mortgagor has to pay the full amount of the debt incurred by the mortgagee.
B) The title of possession is passed on to the mortgagee upon completion of redemption.
C) The mortgagee is allowed to pay back partial interest until the statutory period of redemption.
D) The right to redemption is enacted after the foreclosure is complete.

Question 23

Ethan purchases a house for $250,000. He borrows $200,000 from StarCross Bank and gives the bank a mortgage on the house for this amount. StarCross Bank fails to record the mortgage. Ethan then applies to borrow $200,000 from Pentalon Bank. Pentalon Bank reviews the real estate recordings and finds no mortgage recorded against the property, so it lends Ethan $200,000. Pentalon Bank records its mortgage. Later, Ethan defaults on both loans. In this case, which of the following would be true in case of the possible foreclosure on the collateral?

A) StarCross Bank can foreclose because they made the first loan.
B) Pentalon Bank can foreclose because they recorded the mortgage.
C) The collateral has to be returned to Ethan since there is a violation of the recording statute.
D) None of the parties involved can claim ownership of the collateral as it passes into the public domain.

Question 24

What is the statutory period of redemption?

A) The time limit that a trustee can claim legal title to the real property.
B) The time allotted to a mortgagor to pay the full debt on real property even after foreclosure.
C) The time by which the mortgagor has to pay at least part of his or her debts.
D) The time allotted by which a mortgagee must start legal proceedings against a defaulter.

Question 25

A deed of trust is a two-party instrument.

Question 26

A ________ is a written document signed by a contractor, subcontractor, laborer, or material person, waiving his or her statutory lien against real property.

A) garnishment
B) accommodation
C) lien release
D) notice of lien

Question 27

Foreclosure sales are permitted only in select states.

Question 28

To which of the following type of mortgages does the antideficiency statute apply?

A) foreign currency mortgages
B) home improvement mortgages
C) first purchase money mortgages
D) second purchase money mortgages

Question 29

Who is the beneficiary in a deed of trust transaction?

A) the creditor
B) the debtor
C) the trustee
D) the trustor

Question 30

A ________ is a judgment of a court that permits a secured lender to recover other property or income from a defaulting debtor if the collateral is insufficient to repay the unpaid loan.

A) deficiency judgment
B) garnishment
C) lien release
D) foreclosure judgment

Question 31

A power stated in a mortgage or deed that permits foreclosure without court proceedings and sale of the property through an auction is known as ________.

A) reconveyance
B) foreclosure sale
C) power of sale
D) garnishment

Question 32

In a deed of trust, the creditor is the beneficiary.

Question 33

A ________ is a contractor's, laborer's, and material person's statutory lien that makes the real property to which services or materials have been provided security for the payment of the services and materials.

A) material lien
B) judgment lien
C) tax lien
D) mechanic's lien

Question 34

Wesley buys a house for $1,000,000. He puts $400,000 down and borrows $600,000 from a bank, which takes a mortgage on the property to secure the loan. Wesley defaults, and when the bank forecloses on the property, it is worth only $500,000. There is a shortage of 100,000, as the foreclosure sale price was $500,000. The bank brings a legal action against Wesley. Which of the following can help the bank recover the shortage from Wesley?

A) right of redemption
B) lien release
C) deficiency judgment
D) garnishment

Question 35

The ________ prohibits deficiency judgments regarding certain types of mortgages, such as those on residential property.

A) foreclosure statute
B) mortgage statute
C) recording statute
D) antideficiency statute

Question 36

A ________ requires a mortgage or deed of trust to be recorded in the county recorder's office of the county in which the real property is located.

A) recording statute
B) real property statute
C) mortgage statute
D) compilation statute

Question 37

In a mortgage transaction, the creditor is known as the mortgagee.

Question 38

A right that allows the mortgagor to redeem real property after default and before foreclosure is known as ________.

A) garnishment
B) right of redemption
C) lien release
D) power of sale

Question 39

A mortgage is a two-party instrument.

Question 40

An arrangement in which the owner of real property sells property to a purchaser and extends credit to the purchaser is known as ________.

A) a lien release
B) a credit release
C) accommodation
D) land sales contract

Question 41

An improperly recorded document is effective against subsequent purchasers of real property.

Question 42

A(n) ________ is an arrangement in which a third party promises to be secondarily liable for the payment of another's debt.

A) guaranty arrangement
B) surety arrangement
C) insolvency arrangement
D) accommodation

Question 43

A deficiency judgment protects a mortgagor from being personally sued in case there is a foreclosure sale deficiency.

Question 44

Which of the following is true about a surety's liability to pay in a surety arrangement?

A) The surety is secondarily liable for payment.
B) The surety is primarily liable for payment.
C) The principal debtor must be in default before the surety can be approached.
D) The surety can only be approached as a last resort to the creditor.

Question 45

Surplus money obtained from a foreclosure sale must be given to the mortgagor.

Question 46

A surety is primarily liable for paying the principal debtor's debt when it is due in a surety arrangement.

Question 47

In a deed of trust, the note is the instrument that evidences the borrower's debt to the lender.

Question 48

Which of the following is true of a guarantor in a guaranty arrangement?

A) The guarantor is primarily liable to the principal debtor's debt when it is due.
B) The guarantor can be approached even if the principal debtor is not in default.
C) The creditor can seek first remedy from a guarantor.
D) The guarantor has full legal rights to possession of the real property in this type of arrangement.

Question 49

A lien release signed by a supplier prevents the supplier from later pursing a mechanic's lien against real property.

Question 50

What is an antideficiency statute?

Question 51

The power of sale foreclosure is implied in mortgages and deeds of trust.

Question 52

Default is a situation where the debtor has not made payment when it is due.

Question 53

A recording statute gives potential purchasers of real property the ability to determine whether there are existing liens on a property.

Question 54

An arrangement in which a third party promises to be primarily liable with the borrower for the payment of the borrower's debt is referred to as a(n) ________.

A) garnishment
B) accommodation
C) surety arrangement
D) guaranty arrangement

Question 55

Explain the procedure for obtaining a mechanic's lien.

Question 56

What are foreclosure sales?

Question 57

A court action is necessary for a power of sale foreclosure to be considered valid.

Question 58

A written reconveyance transfers the title of a real property from the trustee.

Question 59

A lienholder must file a notice of lien with the county recorder's office in the county in which the real property subject to the lien is located.

Question 60

The right of redemption only allows the redemption of a partial interest of the mortgagor.

Question 61

A writ of ________ is a postjudgment court order that permits the seizure of a debtor's property that is in the debtor's possession.

A) execution
B) garnishment
C) exigent
D) attachment

Question 62

Regulation Z is an administrative agency regulation that sets forth detailed rules for compliance with the ________ Act.

A) Fair Credit Reporting
B) Truth-in-Lending
C) Fair Credit Billing
D) Fair Debt Collection Practices

Question 63

A prejudgment court order that permits the seizure of a debtor's property while a lawsuit is pending is known as a ________.

A) writ of exigent
B) writ of attachment
C) writ of execution
D) writ of garnishment

Question 64

Alan wins a $50,000 judgment against Henderson, but Henderson refuses to pay the amount of the judgment to Alan. Alan obtains a postjudgment writ from the court directing the sheriff to seize Henderson's automobile and other property and have them publicly auctioned off to satisfy the judgment. Which of the following writs did Alan use?

A) writ of attachment
B) writ of garnishment
C) writ of execution
D) writ of exigent

Question 65

Execution is a postjudgment court order that permits the seizure of the debtor's property that is in the possession of the debtor.

Question 66

The garnishor is the party that is in possession of the debtor's property.

Question 67

Which of the following is a prejudgment writ?

A) writ of garnishment
B) writ of execution
C) writ of attachment
D) writ of exigent

Question 68

In a guaranty agreement, the guarantor is primarily liable on the debt.

Question 69

Gunther wins a $25,000 judgment against Krissa, and Krissa refuses to pay. Krissa works for Iniversal Electronics. Gunther obtains a postjudgment writ of garnishment from the court ordering Iniversal Electronics to pay 25 percent of Krissa's weekly disposable earnings directly to Gunther. However, Gunther is not satisfied with this, and he asks the court to increase Krissa's pay deduction to 50 percent, which the court refuses to do. Which federal Act allows Krissa to retain 75 percent or more of her earnings in a writ of garnishment?

A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Title III of the Consumer Credit Protection Act
D) Fair Debt Collection Practices Act

Question 70

A postjudgment court order that permits the seizure of a debtor's property that is in the possession of third parties is known as the ________.

A) writ of attachment
B) writ of prohibition
C) writ of exigent
D) writ of garnishment

Question 71

Tara lost a large sum of money to Judy when she invested in what she alleged was a fraudulent investment scheme run by Judy. As a result, Tara sued Judy for fraud. However, as it would take more than a year before the case was heard, Tara was afraid that Judy would transfer any money or property she had to avoid having to pay a judgment if she lost at trial. Which of the following would help Tara stop Judy from doing so?

A) writ of attachment
B) writ of execution
C) writ of garnishment
D) writ of exigent

Question 72

A writ of attachment releases a property in the creditor's possession to the debtor.

Question 73

Which of the following federal statutes requires creditors to disclose finance charges, including interest, points, and other fees paid?

A) Fair Debt Collection Practices Act
B) Consumer Financial Protection Act of 2010
C) Mortgage Reform and Anti-Predatory Lending Act of 2010
D) Truth-in-Lending Act

Question 74

The proceeds from the sale of real or personal property authorized by a writ of execution are used to pay the creditor the amount of the final judgment.

Question 75

The ________ Act of 2010 is a federal statute that requires increased disclosure of credit information and terms to consumers and regulates consumer credit providers and others.

A) Fair Credit Billing
B) Consumer Leasing
C) Mortgage Reform and Anti-Predatory Lending
D) Consumer Financial Protection

Question 76

Garnishment is a court order that permits the seizure of a debtor's property that is in the debtor's possession.

Question 77

Which of the following is designed put the burden on mortgage lenders to verify that a borrower can afford to repay the loan for which he or she has applied?

A) Fair Credit Reporting Act
B) Consumer Financial Protection Act of 2010
C) Truth-in-Lending Act
D) Mortgage Reform and Anti-Predatory Lending

Question 78

Stanley lost a court case and was ordered to pay $50,000 to Wade. The day after the judgment, Stanley went missing, leaving Wade with no direct contact to recover the money. Wade then obtained a writ ordering the bank with Stanley's savings account to pay Wade. Which of the following writs did Wade use?

A) writ of garnishment
B) writ of attachment
C) writ of prohibition
D) writ of exigent

Question 79

Which of the following Acts protects debtors who are subject to writ of garnishment from excessive action?

A) Fair Credit Billing Act
B) Consumer Leasing Act
C) Truth-in-Lending Act
D) Title III of the Consumer Credit Protection Act

Question 80

Payment can be obtained from a guarantor even if the principal debtor has not defaulted.