RE 21

13. Evans bought a vineyard from Ray Wines, Inc. Evans made a 30 percent down payment and agreed to assume the mortgage debt. Evans, however, failed to pay on the debt. Acadia National Bank, which held the mortgage, sued Evans. Which of the following is most correct? a. As a third party beneficiary of the assumption agreement, Acadia National may enforce Evans's contract to assume the debt. b. The assumption agreement between Evans and Ray Wines relieved Ray Wines of all personal liability for the debt, transferring that liability to Evans. c. Acadia National was not a party to the assumption agreement between Evans and Ray Wines and has no right to sue Evans. d. Acadia National was not a signatory to the assumption agreement; hence, it must foreclose on the property, since the property remains subject to the mortgage.

a. As a third party beneficiary of the assumption agreement, Acadia National may enforce Evans's contract to assume the debt.

1. The mortgagor is a. the borrower. b. the lender. c. usually the bank. d. the trustee.

a. the borrower.

6. Under an acceleration clause, a. the entire debt becomes due if the mortgagor defaults. b. failure to pay interest or principal does not trigger acceleration. c. breach of covenant not related to payment does not result in a default triggering acceleration. d. the mortgagee is not required to notify the mortgagor of accelerated payments.

a. the entire debt becomes due if the mortgagor defaults.

15. A property leased by Travelers, Inc., from its owner, Smith, is sold at foreclosure sale. The purchaser, Bell Corporation, executes a new mortgage on the property. This mortgage is recorded. Under the priority relationship between mortgages and leases a. Bell Corporation acquires possession free of the Travelers lease. b. Bell Corporation takes the property subject to the Travelers lease. c. the Travelers lease must be renegotiated in accordance with the terms of the mortgage executed by Bell Corporation. d. the Travelers lease becomes void when Bell Corporation's mortgage is recorded.

b. Bell Corporation takes the property subject to the Travelers lease.

11. The amount of the VA guaranty available to an eligible veteran is called the a. assumption. b. entitlement. c. novation. d. assignment.

b. entitlement.

7. The right of the mortgagor or another person with interest in the property to reclaim it after default, but before foreclosure, is referred to as a. statutory right of redemption. b. equity of redemption. c. waiver. d. deed in lieu of foreclosure.

b. equity of redemption.

5. A practical alternative to foreclosure is a. bankruptcy. b. short sale. c. novation. d. assumption.

b. short sale.

9. The main objective of the Truth in Lending disclosure requirements is to a. control the interest rate charged by creditors. b. prevent discriminatory practices. c. foster the informed use of consumer credit. d. compensate spendthrift consumers.

c. foster the informed use of consumer credit.

8. A foreclosure sale terminates all parties' right to a. compensation. b. future credit. c. redeem d. novation.

c. redeem

2. When a deed of trust is executed, a. the trustee holds title for the benefit of the borrower only. b. most states recognize it as the equivalent of a lien. c. the trustee has the power to sell the property if the borrower defaults. d. the borrower's right of redemption is not affected.

c. the trustee has the power to sell the property if the borrower defaults.

3. A borrower's promise to repay a loan is contained in the a. title. b. escrow. c. mortgage. d. note.

d. note.

12. Unlike the lender in a mortgage, the lender in a deed of trust can a. determine the loan rate. b. foreclose in the event of default. c. hold legal title. d. remain anonymous.

d. remain anonymous.

4. In a construction mortgage, a. the construction mortgagee has priority over the claims of the mechanics. b. the mechanics have priority over the claims of the construction mortgagee. c. priority is established by the attachment of the mechanic's lien and not by the recording of the mortgage. d. the recording of the mortgage is decisive in determining priority.

d. the recording of the mortgage is decisive in determining priority.

10. Mortgage priority is important to creditors a. to meet ECOA requirements. b. to avoid predatory practices. c. in adjusting interest rates for ARMs. d. when borrowers default.

d. when borrowers default.