Ch 6 Colibri

What basically happens in a foreclosure?

Lienors force a property owner to give up title. This may involve either the lienors' forcing the owner to sell and pay off the creditors or taking title directly.

What are the basic differences between the three types of foreclosure?

Judicial foreclosure: sale under court supervision
Nonjudicial foreclosure: sale without court supervision
Strict foreclosure: no sale; immediate transfer to lienholder

What are the differences between the two kinds of right of redemption and the right of reinstatement?

Equitable right of redemption gives the borrower the right to pay off loan amounts and reclaim a foreclosed property up until the completion of the foreclosure sale.

Statutory right of redemption allows the borrower to pay the debt and reclaim the property for a statutory period which may go beyond the completion of the sale (up to a year, in some states).

Statutory right of reinstatement allows the borrower to cure the default and reinstate the loan during a statutory period before the lawsuit is concluded.

What happens to the sale proceeds in a judicial sale?

Proceeds are used to pay 1) costs of the sale; 2) special assessment and ad valorem taxes; 3) first mortgage; 4) other mortgages and liens in order of recording; and 5) remainder to the borrower.

What is the purpose of a deficiency judgment?

It enables a lienor to attach the personal and real property of a lienee when the foreclosure sale has not produced enough funds to pay what the lienor is owed.

What power does a lender have if a mortgagor defaults in a state that allows nonjudicial foreclosure and the mortgage document includes a "power of sale" clause?

The lender can give the borrower notice of the default and a chance to cure it, after which the lender may auction the property.

What happens to the title to a foreclosed property in a strict foreclosure?

It transfers immediately to the lienholder.

What is the function of a deed in lieu of foreclosure?

It avoids foreclosure by transferring legal title to the mortgagee.

The first step in a judicial foreclosure is:

acceleration of the loan.

filing a suit.

obtaining a lis pendens.

obtaining a writ of execution.

acceleration of the loan.

All of the following are common consequences suffered by a mortgagor in a foreclosure procedure EXCEPT

all or most equity is lost.

the mortgagor is embarrassed by public knowledge of the foreclosure.

the borrower's credit is damaged for a long time.

the borrower is not allowed to apply for another mortgage loan for even years.

the borrower is not allowed to apply for another mortgage loan for even years.

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

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

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

Seek a deficiency judgment

If a property sold at a court foreclosure does not sell for an amount sufficient to satisfy the outstanding mortgage loan debt, the mortgagee may sue for:

a judgment by default.

a deficiency judgment.

a satisfaction of mortgage.

damages.

a deficiency judgment.

One of the negative features of foreclosure for the mortgagor is:

credit is damaged, making it difficult to purchase another home.

the borrower loses any right to seek another mortgage for seven years.

the borrower loses all equity, even if the sale yields more than the amount owed.

the process happens so quickly that the mortgagor has no time to cure the problem.

credit is damaged, making it difficult to purchase another home.

Foreclosure is:

a court-ordered acceleration of loan payments.

the final step in a bankruptcy filing.

a proceeding to enforce a lien by forcing sale or transfer of a secured property.

a proceeding to take equitable title to a property that was liened as security for a mortgage loan.

a proceeding to enforce a lien by forcing sale or transfer of a secured property.

A property is secured by a mortgage that does not contain a "power of sale" clause. To foreclose, the lien holder will have to:

file a deficiency suit.

file a foreclosure suit.

obtain a deed in lieu of foreclosure.

obtain a writ to extinguish the lien.

file a foreclosure suit.

In a strict foreclosure:

a lender takes title to the liened property directly.

a lender receives the proceeds from the forced sale of the liened property.

the defaulting owner does not have the opportunity to prevent the foreclosure by paying the amounts owed.

a foreclosure suit is optional.

a lender takes title to the liened property directly.

What appraisal methods do tax assessors use to determine the assessed value of a property?

Assessors use any of the standard appraisal methods—sales comparison, cost, income—to assess properties, depending on the type of property. Agricultural land valuation is based on land productivity. The assessor uses whatever approach provides the best estimate of market value, which may then be modified according to formulas to arrive at an assessed value.

What are some circumstances that typically trigger a reassessment of a property?

Improvements to the property in general. Specifically, basement finishing, garage additions, and swimming pool construction.

What is a "homestead exemption?"

A portion of a property's value that is exempted from taxation because the property, or part of it, is owned and occupied as a family residence.