Chapter 18 Flashcards
A ______________ has several other names, including real estate contract, installment sales contract, agreement for deed, agreement to convey, and contract for deed.
Land contract
Under the terms of a ________________, the buyer gets possession of the property and equitable title, while the seller holds legal title to the property and continues to be primarily liable for payment of any existing mortgage.
Land contract
True or false: A land contract is NOT a mortgage. Under a land contract, the sellers keep the title in their own name and the deed shows that the sellers still own the property.
True
All liens can be enforced by the sale or other transfer of title of the secured property, whether by court action, operation of law, or through powers granted in the original loan agreement. The enforcement proceedings are referred to as _______________.
Foreclosure
_________________ are enforced through tax foreclosure sales, or tax sales.
Real estate tax liens
Three types of foreclosure processes enforce mortgage liens:
1) judicial foreclosure
2) non-judicial foreclosure
3) strict foreclosure
_________________ occurs in states that use a two-party mortgage document (borrower and lender) that does not contain a “power of sale” provision.
Judicial foreclosure
If a borrower has failed to meet loan obligations in spite of proper notice and applicable grace periods, the lender can _______________ the loan, or declare that the loan balance and all other sums due on the loan are payable immediately.
Accelerate
A foreclosure suit asks the court to:
1) terminate the defendant’s interests in the property
2) order the property sold publicly to the highest bidder
3) order the proceeds applied to the debt
A _________________ gives public notice that the mortgaged property may soon have a judgment issued against it. This notice enables other lienholders to join in the suit against the defendant.
Lis pendens
In a foreclosure suit, the court’s _________________ authorizes an official, such as the county sheriff, to seize and sell the foreclosed property.
Writ of execution
If the sale does not yield sufficient funds to cover the amounts owed, the mortgagee may ask the court for a _______________.
Deficiency judgment
The borrower’s _________________, also called equity of redemption, is the right to reclaim a property that has been foreclosed by paying off amounts owed to creditors, including interest and costs.
Right of redemption
When there is a “power of sale” provision in the mortgage or trust deed document, a _______________________ can force the sale of the liened property without a foreclosure suit.
Non-judicial foreclosure
The lender does not obtain a deficiency judgment or lien in a non-judicial foreclosure action. The lender instead must file a new _______________ against the borrower.
Deficiency suit
True or false: During the notice of default and notice of sale periods, the borrower may pay the lender and terminate the proceedings.
True
__________________ is a court proceeding that gives the lender title directly, by court order, instead of giving cash proceeds from a public sale.
Strict foreclosure
A defaulting borrower who faces foreclosure may avoid court actions and costs by voluntarily deeding the property to the mortgagee. This is accomplished with a _________________, which transfers legal title to the lienholder.
Deed in Lieu of Foreclosure
A ______________ is a complete financing contract executed between a seller and a buyer, in which the seller pledges to convey the title to the property at the time when the buyer completes whatever obligations the contract stipulates. Under the terms of the land contract, the buyer gets possession of the property and equitable title, while the seller holds legal title to the property and continues to be primarily liable for payment of any existing mortgage.
Land contract
A ________________ is a legal procedure in which the property that is used as security for a debt is sold to satisfy the debt in the event of a default.
Foreclosure
This right to redeem property between the time of the default and the foreclosure sale is called the ________________.
Equity of redemption right
_____________________ refers to the period after a default and before a foreclosure sale, the borrower has a right to reclaim the property that was forfeited due to the mortgage default.
Redemption period
Once the foreclosure sale has taken place, any right to redeem the property must be created by a state statute. This is known as the right of _________________
Statutory redemption
In Texas, if the property is the residence homestead of the defaulted taxpayer or if it is designated for agricultural use, the owner may redeem the property within ___________ after the sheriff’s deed was recorded. This applies only if foreclosure is due to default on a tax lien.
2 years
Any outstanding debt remaining after foreclosure and sale of a property is known as a ________________.
Deficiency judgment
__________________ are unsecured claims and take the place alongside the borrower’s other debts.
Deficiency judgments
___________________ attach only to real estate or other property that the defaulted borrower currently holds or may hold in the future.
Deficiency judgments
The court will order the sale of the property at public auction to be conducted by the sheriff or a court-appointed representative. This is known as the __________________________.
Decree of foreclosure and order of sale
True or false: If the lender wants to be able to get a deficiency judgment, he or she cannot bid at the auction.
True
The _____________________ is issued to the highest bidder in a foreclosure sale and will state that the title is subject to any redemption privilege of the debtor.
Certificate of Sale
True or false: The purchaser of a foreclosed property has no rights to possess the property for the period of redemption. However, he or she does have the right to receive any rents.
True
If the debtor does not redeem the property within the redemption period, the sheriff will issue a _______________ and will record the deed. At that time, the new purchaser receives all rights, title, and interest as of the date the trust deed or mortgage was recorded.
Deed of Conveyance
Most private mortgage insurance companies consider a default to be nonpayment of the loan for ___________________. The lender is required to notify the insurer of the default within ______________, and it is up to the insurer to decide whether or not the lender should foreclose.
Four months, 10 days
When there is a foreclosure action on a conventional insured mortgage, the __________________ is the original bidder at the auction.
First lien holder
The lender files a claim with the mortgage insurer within ______________ after the legal proceedings.
60 days
True or false: The ownership rights acquired by the successful bidder at a foreclosure auction are still subject to any of the original borrower’s redemption rights. Only after those redemption rights have expired can the bidder gain fee simple absolute title.
True
Before a lender can begin a foreclosure on an FHA-insured mortgage, the lender must file a _____________________ and deliver that form to the local FHA administrative office within 60 days of the default.
Form 2068 Notice of Default
The ______________________ describes the reasons for the default, which could include death, illness, marital difficulties, loss of income, excessive obligations, employment transfer or military service.
Notice of Default
FHA counselors may design an agreement between the lender and borrower to avoid foreclosure. This may be called _____________________.
Forbearance of foreclosure
In a forbearance of foreclosure, if the default is not cured within _____________ the lender can file a default status report and initiate foreclosure.
1 year
If a veteran borrower is delinquent on his or her loan payment of more than ___________, the lender must formally notify the local VA office.
Three months
__________________ shortens a borrower’s redemption time by eliminating the statutory redemption period that is allowed in the judicial foreclosure process.
Non-judicial foreclosure
In a non-judicial foreclosure, prior to initiating a foreclosure, the lender must send a demand letter requesting the payment of past due amounts which gives the borrower ______________ to pay any past due amounts otherwise foreclosure proceedings will begin.
20 days
After the twenty day notice described above and at least twenty-one (21) days before any foreclosure sale, further notice of the foreclosure must:
1) Be filed with the county clerk in the county in which the property is located
2) Mailed to the defaulting borrower (and other creditors whose liens affect the property) and
3) Be posted at the county court where any sale would occur
Foreclosure sales must take place on ______________________ at the courthouse, even if the date falls on a legal holiday.
the first Tuesday of each month (between 10AM and 4PM)
The trustee can postpone the sale, by making an announcement at the time and place of the sale, up to ________ times.
Three
True or false: The trustee can postpone a non-judicial foreclosure sale, by making an announcement at the time and place of the sale, up to three times. If there are more than three postponements, the trustee will have to record, publish, mail, and post a new notice of sale.
True
________________________ eliminates all junior liens, any encumbrances that exist on the property except for valid leases, and any further rights of reinstatement on the part of the defaulted borrower.
Recording the trustee’s deed
In a ________________, after notice has been given to the delinquent borrower and the proper papers have been filed, the court will establish a specific time during which the borrower may redeem the loan. If the borrower does not exercise the option, his or her equitable and statutory redemption rights will be eliminated and full legal title will be awarded to the lender.
Strict foreclosure
____________________ is seldom used because of the potential unfairness that might occur from a foreclosure of a property which has no established value.
Strict foreclosure
A ________________ is any outstanding debt remaining after foreclosure and sale of a property.
Deficiency judgment
With a judicial foreclosure, the sheriff will issue a _____________________ if the debtor does not redeem the property within the redemption period.
Deed of Conveyance
If the foreclosure bids are less than the loan balance on an FHA insured loan, FHA expects the lender to bid on the debt, take the title, and present it to the FHA along with a __________________.
Claim for insurance
In a non-judicial foreclosure sale, the new purchaser will receive a trustee’s deed to the property. But what potential problem exists?
There is no guarantee that the title is clear. There may be some outstanding liens still in effect, such as a federal tax lien, real property taxes or assessments, or a valid mechanic’s lien.
Lenders may have the right to file foreclosure actions in as little as ___________ after the missed payment date.
60 days
A _________________ occurs when a lender allows a borrower in default on mortgage loan payments to sell the mortgaged property for less money than necessary to satisfy the loan in order to avoid the delay and expense of a foreclosure sale. The lender usually forgives the mortgage balance owed after the sale.
Short sale
Lenders wish to avoid foreclosure because it can result in the bank owning the asset and thus carrying a _________________ on its books.
Real Estate Owned (REO)
______________ occurs when the lender takes back a house because the homeowner has not made mortgage payments. When this happens, the house becomes an REO lender owned property.
Foreclosure
_______________ happens before the foreclosure takes place. A homeowner sells the property based on a listing price arrived at by a comparative market analysis of recent comparables and the condition of the home. In the end, the lender agrees to accept less than what is actually owed.
Short sale
A ________ is a creditor’s claim against personal or real property as security for a debt of the property owner.
Lien
A ________ is an encumbrance that restricts free and clear ownership by securing the liened property as collateral for a debt.
Lien
True or false: A lien does not convey ownership. The exception is a mortgage lien on a property in a title-theory state. In these states, the mortgage transaction conveys legal title to the lender, who holds it until the mortgage obligations are satisfied. During the mortgage loan period, the borrower has equitable title to the property.
True
A lien terminates on ________________________.
Payment of the debt and recording of document
A property owner may create a _________________ to borrow money or some other asset secured by a mortgage
Voluntary lien
An ____________________ is one that a legal process places against a property, regardless of the owner’s desires.
Involuntary lien
A ____________________ is an involuntary lien imposed by statutory law.
Statutory lien
An ____________________ is an involuntary lien imposed by court action.
Equitable lien
A _________________ is one placed against any and all real and personal property owned by a particular debtor.
General lien
A _________________ attaches to a single item of real or personal property, and does not affect other property owned by the debtor.
Specific lien
True or false: The category of superior, or senior, liens ranks above the category of inferior, or junior, liens, meaning that superior liens receive first payment from the proceeds of a foreclosure. The superior category includes liens for real estate tax, special assessments, and inheritance tax. Other liens, including income tax liens, are inferior.
True
Two factors primarily determine lien priority:
1) the lien’s categorization as superior or junior
2) the date of recordation of the lien
Among junior liens, _________________ determines priority.
Date of recording
The _________________ is an exception to the recording rule. Its priority dates from the point in time when the work commenced or ended, as state law determines, rather than from when it was recorded.
Mechanic’s lien
A _________________ attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor
Judgment lien
During the course of a lawsuit, the plaintiff creditor may secure a _______________ to prevent the debtor from selling or concealing property.
Writ of attachment
A _________________, also called a seller’s lien, secures a purchase money mortgage, a seller’s loan to a buyer to finance the sale of a property
Vendor’s lien
A _________________ is when the buyer files a claim in situations where the seller has not delivered the title after all other terms of the contract have been satisfied.
Vendee’s lien
A municipality may place a utility lien against a resident’s real property for failure to pay utility bills called a __________________.
Municipal utility lien
In Texas, a real estate owner may put up real estate instead of cash to pay bail if he or she has been charged with a crime. This is called a _____________________.
Surety Bail Bond Lien
A __________________ is recorded if the owner can prove that he or she has a net worth of at least twice the amount of the bail.
Surety bail bond lien
True or false: Homestead property cannot be levied against for surety bail bond lien.
True
If an employer owes back wages to an employee, a TWC wage lien can be set against all real and personal property of the employer. If the money cannot be collected, then a lien may be filed as a permanent record of the debt owed to the claimant by the employer. This is called a ____________________.
TWC Wage Lien
A _________ is a creditor’s claim against personal or real property as security for a debt of the property owner.
Lien
What are the four legal features of a lien?
1) A lien does not convey ownership, with one exception.
2) A lien attaches to the property.
3) A property may be subject to multiple liens.
4) A lien terminates on payment of the debt and recording of documents.
What two factors primarily determine lien priority?
1) the lien’s categorization as superior or junior
2) the date of recordation of the lien
A _______________ attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor.
Judgment lien
A non-judicial foreclosure is also known as a ___________________.
Power of sale
The primary method of foreclosure in Texas is the _________________________.
Non-judicial foreclosure
A _______________ is a creditor’s claim against personal or real property as security for a debt of the property owner. If the owner defaults, the lien gives the creditor the right to force the sale of the property to satisfy the debt.
Lien
______________ may be voluntary or involuntary, general or specific, and superior or inferior.
Liens
There are estimates that one single foreclosure can reduce neighborhood property values and home equity by as much as ______________.
$220,000
Which foreclosure occurs in states that use a two-party mortgage document that does not contain a “power of sale” provision?
Judicial foreclosure
According to estimates by the Mortgage Bankers Association how many new families go into foreclosure every quarter?
250,000
What type of mortgage clause enables the mortgagee to order a public sale without court decree?
Power of sale
Most private mortgage insurance companies consider a default to be nonpayment of the mortgage for how long?
4 months
