SU # 48__Foreclosure, Redemption and Bankruptcy

Question 1

In what type of foreclosure is the lender required to file suit asking a court to order the borrower to pay the mortgage debt by a certain date or the lender will automatically gain full title to the property?

Standard

Judicial

Strict

Non-judicial

Answer 1

Strict

Question 2

Which statement about a deed in lieu of foreclosure is TRUE?

It gives the borrower an opportunity to change the loan terms.

It is a deed to the lender in exchange for a reduction in the loan payoff.

It avoids public notice of the foreclosure.

It is always accepted by the lender since it reduces the costs of foreclosure.

Answer 2

It avoids public notice of the foreclosure.

Question 3

In what type of foreclosure does a lender give a borrower a notice of default in a form prescribed by the state?

Judicial foreclosure

Strict foreclosure

Standard foreclosure

Non-judicial foreclosure

Answer 3

Non-judicial foreclosure

Question 4

What action must the lender take when a notice of reinstatement occurs?

The lender must declare a moratorium on mortgage payments.

The lender must pay all fees and renegotiate the mortgage.

The lender must dismiss the suit and continue the mortgage.

The lender must dismiss the lien and continue the suit.

Answer 4

The lender must dismiss the suit and continue the mortgage.

Question 5

Which of the following statements best defines Equitable Right of Redemption?

The legal right of a borrower to seek a reduction in payments on a property mortgage

The legal right of a borrower to redeem property between the time of default and the foreclosure sale.

The legal right of a borrower to seek a statutory right of reinstatement.

The legal right of a borrower to appeal a deficiency judgment within 7 months of notice.

Answer 5

The legal right of a borrower to redeem property between the time of default and the foreclosure sale.

Question 6

The first step in a judicial foreclosure is:

acceleration of the loan.

filing a suit.

obtaining a lis pendens.

obtaining a writ of execution.

Answer 6

acceleration of the loan.

Question 7

Which of the following statements about foreclosure in Illinois is TRUE?

All types of foreclosure are allowed.

Foreclosure is not allowed if there is a deed of trust.

Mortgage foreclosures require a court proceeding.

Illinois is a non-judicial foreclosure state.

Answer 7

Mortgage foreclosures require a court proceeding.

Question 8

Which of the following statements best defines Statutory Right of Redemption?

The right of a defaulted property owner to recover damages after the sale.

The right of a lender to recover expenses after the sale from the defaulted property owner.

The right of a defaulted property owner to recover and remove personal property after the sale.

The right of a defaulted property owner to recover the property after the sale.

Answer 8

The right of a defaulted property owner to recover the property after the sale.

Question 9

One way that a Chapter 13 bankruptcy differs from a Chapter 7 bankruptcy is that it

results in a discharge of all obligations.

includes a plan for repayment.

prevents creditors from attempting to collect on debts.

does not apply to installment debt.

Answer 9

includes a plan for repayment.

Question 10

Illinois has enacted legislation “opting out” of any federal bankruptcy exemptions. As a result,

Illinois bankruptcy filers may file “in state only” for any exempt property allowed by federal or state

Illinois bankruptcy filers may file a federal bankruptcy and a state bankruptcy request

Illinois bankruptcy filers are only permitted to exempt property using state laws

No exemptions are allowed

Answer 10

Illinois bankruptcy filers are only permitted to exempt property using state laws

Question 11

If a bankruptcy proceeding begins before a foreclosure proceeding, __________.

the foreclosure proceeding cancels the bankruptcy.

the foreclosure proceeding is stayed until completion of
the bankruptcy process.

the bankruptcy proceeding is suspended until the foreclosure process is completed.

the two processes are combined into one.

Answer 11

the foreclosure proceeding is stayed until completion of

the bankruptcy process.

Question 12

Ronald defaulted on his home mortgage payments. The lender obtained a court order to foreclose on the property. At the foreclosure sale, Ronald’s house sold for $29,000 and the unpaid balance of his loan is $40,000. What must the lender do to recover the $11,000 Ronald still owes?

Sue for damages.

Sue for specific performance.

Seek a deficiency judgment.

Seek a lis pendens.

Answer 12

Seek a deficiency judgment.

Question 13

Easements and encroachments are types of

a. lien.
b. deed restriction.
c. encumbrance.
d. appurtenance

Answer 13

c. encumbrance

Question 14

An affirmative easement gives the benefited party

a. the right to possess a defined portion of another’s real property.
b. the right to prevent the owner of a real property from using it in a defined way.
c. the right to a defined use of a portion of another’s real property.
d. the right to receive a portion of any income generated by another’s real property.

Answer 14

c. the right to a defined use of a portion of another’s real property

Question 15

There are two adjoining properties. An easement allows property A to use the access road that belongs to property B. In this situation, property A is said to be which of the following in relation to property B?

a. Subservient estate
b. Servient estate
c. Senior tenant
d. Dominant tenement

Answer 15

d. Dominant tenement

Question 16

Which of the following describes a situation in which an easement might be created against the wishes of the property owner?

a. The property has been continuously used as an easement with the knowledge but without the permission of the owner for a period of time.
b. The owner of an adjoining property asks the property owner for an easement, is refused, and then uses the property anyway without the knowledge of the owner.
c. The owner of an adjoining property decides he needs to widen his driveway by sharing his neighbor’s driveway and sues in court to create an easement by necessity.
d. The owner of an adjoining property grants an easement to a third party that includes an easement on the first property.

Answer 16

a. The property has been continuously used as an easement with the knowledge but without the permission of the owner for a period of time

Question 17

What is the primary danger of allowing an encroachment?

a. An encroachment automatically grants the benefiting party an easement.
b. The encroached party may be liable for additional real estate taxes to cover the area being encroached upon by the neighboring property.
c. Over time, the encroachment may become an easement by prescription that damages the property’s market value.
d. An encroachment creates a lien.

Answer 17

c. Over time, the encroachment may become an easement by prescription that damages the property’s market value

Question 18

A property owner who is selling her land wants to control how it is used in the future. She might accomplish her aim by means of

a. an injunction.
b. a deed restriction.
c. an easement.
d. a land trust.

Answer 18

b. a deed restriction

Question 19

What distinguishes a lien from other types of encumbrance?

a. It involves a monetary claim against the value of a property.
b. It lowers the value of a property.
c. It is created voluntarily by the property owner.
d. It attaches to the property rather than to the owner of the property.

Answer 19

a. It involves a monetary claim against the value of a property

Question 20

A certain property has the following liens recorded against it: a mortgage lien dating from three years ago; a mechanic’s lien dating from two years ago; a real estate tax lien for the current year; and a second mortgage lien dating from the current year. In case of a foreclosure, which of these liens will be paid first?

a. First mortgage lien
b. Mechanic’s lien
c. Real estate tax lien
d. Second mortgage lien

Answer 20

c. Real estate tax lien

Question 21

The lien priority of junior liens can be changed by a lienor’s agreement to

a. forgive portions of the debt.
b. assign the note.
c. foreclose on the note.
d. subordinate.

Answer 21

d. subordinate

Question 22

Among junior liens, the order of priority is generally established according to

a. the date of recordation.
b. the amount.
c. the order of disbursement.
d. special agreement among lienees.

Answer 22

a. the date of recordation

Question 23

What is meant by a “lien-theory” state?

a. A state in which liens are given priority over other encumbrances
b. A state in which a mortgagor retains title to the property when a mortgage lien is created
c. A state in which the holder of a mortgage lien receives title to the mortgaged property until the debt is satisfied
d. A state in which liens exist in theory but not in practice

Answer 23

b. A state in which a mortgagor retains title to the property when a mortgage lien is created

Question 24

A homeowner has hired a contractor to build a room addition. The work has been completed and the contractor has been paid for all work and materials but fails to pay the lumber yard for a load of lumber. What potential problem may the home owner experience?

a. The contractor may place a mechanic’s lien for
the amount of the lumber against the homeowner’s real property.

b. The lumber yard may place a vendor’s lien against the contractor and the homeowner for the amount of the lumber.
c. The lumber yard may place a mechanic’s lien for the amount of the lumber against the homeowner’s real property.
d. The homeowner has no liability because the contractor was paid for the lumber.

Answer 24

c. The lumber yard may place a mechanic’s lien for the amount of the lumber against the homeowner’s real property

Question 25

The process of enforcing a lien by forcing sale of the lienee’s property is called

a. execution.
b. attachment.
c. foreclosure.
d. subordination

Answer 25

c. foreclosure

Question 26

An important difference between a judicial foreclosure and a non-judicial foreclosure is

a. there is no right to redeem the property in a non-judicial foreclosure.
b. a judicial foreclosure forces a sale of the property.
c. a non-judicial foreclosure ensures that all liens are paid in order of priority.
d. the lienor receives title directly in a non-judicial foreclosure.

Answer 26

a. there is no right to redeem the property in a non-judicial foreclosure

Question 27

A defaulting borrower may avoid foreclosure by giving the mortgagee

a. a promissory note.
b. a deed in lieu of foreclosure.
c. a redemption notice.
d. a lis pendens.

Answer 27

b. a deed in lieu of foreclosure

Question 28

A property survey reveals that a new driveway extends one foot onto a neighbor’s property. This is an example of

a. a easement appurtenant.
b. an encroachment.
c. an easement by prescription.
d. a party wall easement.

Answer 28

b. an encroachment

Question 29

A property owner has an easement appurtenant on her property. When the property is sold to another party, the easement

a. terminates.
b. transfers with the property.
c. transfers with the owner to a new property.
d. becomes a lien on the property.

Answer 29

b. transfers with the property

Question 30

A brick fence straddles the property line of two neighbors. The neighbors agree not to damage it in any way. This is an example of

a. a party wall.
b. an encroachment.
c. a trade fixture.
d. a deed restriction

Answer 30

a. a party wall

Question 31

A property owner allows Betty Luanne to cross his property as a shortcut to her kindergarten school bus. One day the property owner dies. What right was Betty given, and what happens to it in the future?

a. A personal easement in gross, which continues after the owner’s death
b. An easement by prescription, which continues after the owner’s death
c. A license, which continues after the owner’s death
d. A license, which terminates at the owner’s death

Answer 31

d. A license, which terminates at the owner’s death

Question 32

A court renders a judgment which authorizes a lien to be placed against the defendant’s house, car, and personal belongings. This is an example of a

a. specific judgment lien.
b. general judgment lien.
c. voluntary judgment lien.
d. superior judgment lien

Answer 32

b. general judgment lien