Ch 13 Quizzes Flashcards
T/F: A lien is a possessory interest in property
False
A lien is a financial encumbrance, so it is a nonpossessory interest.
T/F: Ownership of a property can be transferred without paying off the liens against it.
True
A new owner may take title to a property subject to existing liens.
T/F: A promissory note collateralizes a property to act as security for a loan.
False
A security instrument collateralizes a property so that it acts as security for a loan, and gives the lender the right to foreclose in the event of default.
** A security instrument may be either a mortgage or a deed of trust.
Under a mortgage, the borrower is called a mortgagee.
False
A mortgagee is the lender in a mortgage loan transaction;
a mortgagor is the borrower in a mortgage loan transaction.
Under a deed of trust, the lender is called a beneficiary
True
Under a deed of trust:
The lender is the beneficiary of a deed of trust;
The borrower is the trustor; and
The trustee is a third party who will handle foreclosure, if needed
This type of clause states that if the borrower defaults, the lender may demand payment of the entire loan balance.
Acceleration.
An acceleration clause allows a lender to call the note, in other words, demand payment of the entire loan balance immediately.
This type of clause gives the lender the right to accelerate the loan if the borrower sells the security property.
Alienation.
An alienation clause, or due-on-sale clause, allows the lender to demand repayment of the entire loan upon the sale of the property.
This type of clause may impose penalties for repaying all or a portion of a loan before it is due.
Prepayment.
In some cases, a lender may impose a prepayment penalty to dissuade borrowers from prepaying a loan.
This type of clause gives the security instrument lower lien priority than another security instrument that will be recorded later.
Subordination.
A subordination clause means that a mortgage recorded first will have lower priority than another loan (such as a construction loan) that will be recorded later.
This type of clause requires the lender to release the security property from the lien once the loan is paid off.
Defeasance.
A defeasance clause requires the lender to record a document releasing the security property from the lien once the loan is paid off.
(T/F) A deed of trust is generally foreclosed through a nonjudicial process.
True.
Mortgages are generally foreclosed judicially; deeds of trust are generally foreclose nonjudicially.
(T/F) A document called a lis pendens gives notice that a property is subject to a pending foreclosure suit.
True.
A lis pendens provides notice to potential buyers that title to the property may be affected by the outcome of a pending lawsuit.
(T/F) A court’s order directing the sheriff to sell a property is known as a decree of foreclosure.
True.
The court order that results from a foreclosure suit is a decree of foreclosure.
(T/F) In a judicial foreclosure process, the property is sold to the public at a sheriff’s sale.
True.
A foreclosed property is sold through a sheriff’s sale, if the judicial foreclosure process is being used.
(T/F) If the proceeds of a sheriff’s sale were adequate to repay the debt and the costs, the borrower has a one-year statutory redemption period.
False.
If the proceeds of a sheriff’s sale were adequate to repay the debt and costs, the borrower has a three-month statutory redemption period.
