RE Finance - Unit 10: Defaults and Forclosures

In a foreclosure, a loan is retired without being paid in full. Which of the following statements regarding the tax impacts of foreclosure is NOT true?

Concern over the continuance of the Mortgage Forgiveness Debt Relief Act has caused an upturn in the number of short sales.

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

Housing Act of 1964.

Which of the following BEST describes a borrower's diminishing the value of the collateral?

Overgrown grass and debris in the yard

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. The mortgage company may pursue the borrowers for recovery of these costs through

a deficiency judgment.

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, the borrower/homeowner should provide the lender with

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

A homeowner's property was sold at a foreclosure sale in January. In June, the homeowner paid all monies past due and redeemed the property. In order to do this, the state in which the property is located must have

a statutory period of redemption.

Before a lender decides to foreclose, full consideration is given to all of the following EXCEPT

current interest rate.

When a lender waives a portion of the payment to help the borrower regain financial balance for a limited period, this is described as

forbearance.

The only time a foreclosure should be considered is when

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

The additional time that the borrower is allowed to recover a property after a foreclosure sale is called

the statutory redemption period.