Unit 10 - Defaults and Foreclosures (Questions)

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The MOST critical player in a nonjudicial foreclosure is
A)
the trustor.
B)
the trustee.
C)
the lender.
D)
the beneficiary.

the trustee.

When a couple defaulted on their mortgage loan with a mortgage company, the lender foreclosed. The house was sold at auction, but the mortgage company did not receive enough money to cover the loan balance due and the costs of the foreclosure proceedings.

a deficiency judgment.

To provide relief to lenders when borrowers will not vacate their property after the equitable redemption period, a formal process was put in place that results in the decree of foreclosure. It is known as
A)
judicial foreclosure.
B)
deed in lieu of forec

strict forfeiture.

It is typically easier to get foreclosure relief from lenders on an FHA mortgage when the default is beyond the borrower's control because of the
A)
Privacy Act.
B)
Community Reinvestment Act.
C)
Housing Act of 1964.
D)
Equal Credit Opportunity Act.

Housing Act of 1964.

During the judicial foreclosure and sale process for conventional mortgages, a title search is made to determine the identities of all parties that have an interest in the collateral property so they can be sent a
A)
due-on-sale notice.
B)
right of redemp

lis pendens.

The only time a foreclosure should be considered is when
A)
the borrower has filed for bankruptcy.
B)
the borrower is four months delinquent.
C)
the current market value of the property is less than the balance due on the loan.
D)
the previous year's taxe

the current market value of the property is less than the balance due on the loan.

To recover the payments suspended during a moratorium, instead of charging higher payments, a lender may choose to offset any possible hardships for the borrower by
A)
settling for less money.
B)
providing an equitable title.
C)
creating a junior lien.
D)

extending the term of the loan by a time interval equal to the moratorium period.

The concept of full payment waivers originated during the Great Depression and are called
A)
deed in lieu of foreclosure.
B)
moratoriums.
C)
recasting.
D)
voluntary transfer of deeds.

moratoriums.

A couple has been notified that they are in default on their mortgage payments and that the entire amount of the loan is now due. Their loan contract likely included
A)
a delinquency clause.
B)
a due-on-sale clause.
C)
an alienation clause.
D)
an accelera

an acceleration clause.

The system that developed to allow distressed borrowers extra time to raise the funds necessary to protect their property from foreclosure is called
A)
a strict forfeiture.
B)
a forbearance.
C)
a moratorium.
D)
an equitable redemption period.

an equitable redemption period.

The BEST method a lender can use for a guide to avoid poor property management by the homeowner/borrower is
A)
notification by appraisal district.
B)
inspection by the lender.
C)
information from neighbors.
D)
pride of ownership.

pride of ownership.

Most lenders are not disturbed by payments made within the grace period, but they will take remedial action when an account consistently incurs late charges or when a borrower exceeds a delinquency period of how many days?
A)
10
B)
90
C)
30
D)
60

30

A borrower has been making payments by the 15th of the month on his mortgage for the past three years, but because of a recent layoff, he has not been able to make a payment for the past two months. The loan is considered to be
A)
in default.
B)
60 days p

in default.

A homeowner decided to change her homeowners insurance to a new company and canceled her policy. The lender received notice that the old insurance was canceled but did not receive notice of placement of new insurance. In order to avoid being in default, t

a paid invoice as evidence the insurance was paid before lapse.

Before a lender decides to foreclose, full consideration is given to all of the following EXCEPT
A)
borrower's equity in the property.
B)
general state of the real estate market.
C)
current interest rate.
D)
positions of any junior lienholders.

current interest rate.

More than 20 states in the United States require a judicial foreclosure and sale. If all attempts to resolve the default with the mortgagor have failed, the first step the lender takes is to
A)
issue a summons to the mortgagor, initiating the foreclosure

file a complaint in the court of the county where property is located.

A woman has become delinquent on her Federal Housing Administration (FHA) mortgage since her job was terminated and she has had back surgery. The FHA has determined that the delinquency was caused by circumstances beyond her control. It is MOST likely tha

forgo foreclosure for a one-year period.

When a lender agrees to forbearance or a moratorium of mortgage payments, the amount of principal and interest that accrues during that time may be satisfied by any of the following EXCEPT
A)
the lender accepts the loss.
B)
increase the amount due for the

lower the payments to suit the borrower's damaged financial position.

In the foreclosure process, a public sale is necessary in order to establish
A)
actual market value of the property.
B)
names of unknown creditors.
C)
market value before foreclosure.
D)
right of ownership.

actual market value of the property.

What is an alternative to foreclosure that has gained more popularity in recent years because of borrowers being underwater on their mortgages and only able to sell their homes for less than the amount owed?
A)
Voluntary foreclosure
B)
Equitable title
C)

Short sales

Foreclosures on FHA-insured mortgages start with the filing of Form 2068, Notice of Default, which must be given to the local FHA administrative office within how many days of default?
A)
30
B)
45
C)
90
D)
60

60

A default on a real estate loan may occur when the borrower-owner allows the property to deteriorate, reducing its value substantially.
True
False

True

The MOST common cause of default on a real estate loan occurs when the payments are not made.
True
False

True

A voluntary deed in lieu of foreclosure may be utilized to offset a formal foreclosure.
True
False

A voluntary deed in lieu of foreclosure may be utilized to offset a formal foreclosure.
True
False

Contract law prohibits any adjustments to be made by the parties in a real estate loan that is on the brink of foreclosure.
True
False

False

In a power-of-sale foreclosure, the borrowers' redemption rights are eliminated after the auction sale by the elimination of the statutory redemption period granted in the judicial process.
True
False

True

If a defaulted borrowers' adjusted book value is less than the balance of the loan's balance, the borrower may be required to pay income taxes after the foreclosure sale.
True
False

True

Under a judicial foreclosure, the borrowers' rights of redemption are eliminated.
True
False

False

In a foreclosure settlement, the junior lender's balance is paid first.
True
False

False

If the proceeds of a foreclosure auction sale are not adequate to pay all the expenses, the lender may elect to sue for a deficiency judgment.
True
False

True