Unit 7:National Ownership: Foreclosure

What is a short sale? A lender forces the sale of a mortgaged property without first giving notice of default. A deficiency judgment forces a defaulted borrower to sell personal property to settle a debt. A borrower sells the mortgaged property for less than what is owed on the loan balance. A foreclosed property is sold quickly at a public auction instead of through a standard sales process.

A borrower sells the mortgaged property for less than what is owed on the loan balance.

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 law suit is concluded.

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

It avoids foreclosure by transferring legal title to the mortgagee.

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

It transfers immediately to the lienholder.

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

Judicial foreclosure: sale under court supervision Non-judicial foreclosure: sale without court supervision Strict foreclosure: no sale; immediate transfer to lienholder.

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 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; 5) remainder to the borrower.

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

Strict

What power does a lender have if a mortgagor defaults in a state that allows non-judicial 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 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.

The lender must dismiss the suit and continue the mortgage.

How long after default does the foreclosure process begin? 90 days 120 days The period set by statute Whatever length the lender customarily uses

Whatever length the lender customarily uses

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.

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.

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.

One reason a deed in lieu of foreclosure is attractive to some borrowers is that it terminates all existing liens on the property. minimizes the damage to the borrower's credit. enables the borrower to share in the proceeds when the property is sold. demonstrates that market conditions, not any failure of the mortgagor, are the cause of the default.

minimizes the damage to the borrower's credit.

he period of delinquency allowed before a lender begins foreclosure proceedings is determined by statute. the secondary mortgage market. investors. the lender.

the lender.