Question 1

A "_____" is a security interest in real property or a deed to real property that is given by the owner as security for a debt owed to the creditor.

Accepted Answer

A mortgage is a security interest in real property or a deed to real property that is given by the owner (the mortgagor)as security for a debt owed to the creditor (the mortgagee).

Question 2

What Article of the UCC deals with liens,both carriers and warehousemen?

Accepted Answer

Carriers' liens and warehousemen's liens are provided for in Article 7 of the Uniform Commercial Code (UCC).

Question 3

In the case of _____,the right must be expressly conferred on the mortgagee by the terms of the mortgage.

Accepted Answer

The right to foreclose under a power of sale must be expressly conferred on the mortgagee by the terms of the mortgage.

Question 4

A clause in a mortgage specifies that "if the mortgaged property is sold,then the remaining balance becomes immediately due and payable." This clause is called:

Accepted Answer

If a mortgage provides that in the event of the property being sold,the remaining balance becomes immediately due and payable,it is a "due on sale" clause.

Question 5

Under the _____ system,the subcontractors or materialmen have direct liens and are entitled to liens for the value of labor and materials furnished,irrespective of the amount due from the owner to the contractor.

Accepted Answer

Two distinct systems-the New York system and the Pennsylvania system-are followed by the states in allowing mechanic's liens on real estate to subcontractors and materialmen.Under the Pennsylvania system,the subcontractors or materialmen have direct liens and are entitled to liens for the value of labor and materials furnished,irrespective of the amount due from the owner to the contractor.

Question 6

An artisan who makes an improvement on a personal property is given a _____ on it until he is paid.

Accepted Answer

An artisan uses his labor or materials to improve personal property that belongs to someone else.The improvement becomes part of the property and belongs to the owner of the property.Therefore,the artisan who made the improvement is given a lien on the property until he/she is paid.

Question 7

Today,most artisans' liens:

Accepted Answer

The common law lien and most of the statutory liens require that,for the lien to come into play,possession of the goods must have been entrusted to the artisan.

Question 8

Xavier deeds to Peter,a trustee,his property in the form of security for the loan,which is lent by Smith,the beneficiary of the trust.The nature of this transaction renders it as a deed of trust.Under these circumstances,if Xavier defaults to pay the loan,which of the following is the appropriate way in which Smith can recover his loan?

Accepted Answer

If the debtor fails to make a required payment on the debt,the trustee does not sell the property until the lender notifies him that the borrower is in default and demands that the property be sold.The trustee must notify the debtor that he is in default and that the land will be sold.

Question 9

In the case of _____,after the foreclosure,the proceeds of the sale are applied to the payment of the mortgage debt,and any surplus is paid over to the mortgagor.

Accepted Answer

In the case of foreclosure by action and sale,after the foreclosure,the proceeds of the sale are applied to the payment of the mortgage debt,and any surplus is paid over to the mortgagor.

Question 10

_____ is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.

Accepted Answer

Foreclosure is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.

Question 11

Which of the following is an essential element of a lien?

Accepted Answer

The two essential elements of the lien are (1)possession by the improver or the provider of services and (2)a debt created by the improvement or the provision of services concerning the goods.

Question 12

Mike operates an upholstering business.He goes to Hans' house to reupholster a sofa for Hans.After the work was complete,Hans refused to pay the agreed price.Mike wants to assert a lien against the sofa in order to collect the money due to him.Is Mike entitled to a lien under these circumstances?

Accepted Answer

For the lien to come into play,possession of the goods must have been entrusted to the artisan.

Question 13

In a(n)_____ transaction,the borrower keeps the title of his real property with a third party and in the event of default,the third party can sell the property so that the creditor can recover his loan.

Accepted Answer

In a deed of trust transaction,the borrower deeds to the trustee the property that is to be put up as security.The trust agreement usually gives the trustee the right to foreclose or sell the property if the debtor fails to make a required payment on the debt.

Question 14

Courts today view a mortgage as:

Accepted Answer

Today,the mortgage is viewed as a lien on land rather than a conveyance of title to the land.

Question 15

Bob borrowed $200,000 from ABC Bank to purchase his residential house.A mortgage was used as the financing vehicle.Several years later Bob encountered financial difficulties.He did not pay his mortgage payments for 4 months and the bank foreclosed.At that time the remaining loan balance was $170,000.Bob had not maintained the property well,and the winning bid at the foreclosure auction sale was only $150,000.Is Bob liable for the $20,000 deficiency that has resulted (using the majority rule)?

Accepted Answer

This is a case of a deficiency judgment.Such judgments are generally not permitted where the property sold is the residence of the debtor.

Question 16

A party who borrows money to buy a home and signs an agreement giving the bank the right to repossess the home in case of default is called a:

Accepted Answer

A mortgage is a security interest in real property or a deed to real property that is given by the owner (the mortgagor)as security for a debt owed to the creditor.

Question 17

In the case of _____,a buyer takes possession of the property,pays the taxes,insures the property,and assumes several obligations of an owner.However,the seller keeps legal title and does not turn over the deed until the purchase price is paid.

Accepted Answer

In a land contract,the seller keeps legal title and does not turn over the deed until the purchase price is paid by the buyer.If the buyer defaults,the seller usually has the right to declare a forfeiture and take over possession of the property.

Question 18

Under which of the following systems of foreclosure does the creditor have no right to recover any deficiency between the value of the property and the amount of the debt?

Accepted Answer

In a strict foreclosure,the creditor keeps the property in satisfaction of the debt,and the owner's rights are cut off;this means that the creditor has no right to a deficiency and the debtor has no right to any surplus.

Question 19

A software engineer installs new software in Dick's computer and returns the computer to Dick.Dick defaults in his payments for the new software.The software engineer loses his right of lien because:

Accepted Answer

If the artisan or other lienholder gives up the goods voluntarily,he loses the lien.

Question 20

Jerry wants to purchase a flat.So he borrows $50,000 from XYZ bank.He signs a note for $50,000 and gives the bank a $50,000 mortgage on the flat as security for his repayment of loan.Within a year and a half,Jerry repays the entire loan.After the repayment of the loan,which of the following right does Jerry have against XYZ bank?

Accepted Answer

The right of redemption gives a person the absolute right to discharge the mortgage when due and to have title to the mortgaged property restored free and clear of the mortgage debt.

Quiz 28: Introduction to Credit and Secured Transactions