another study set for the CE shop

The lender allows the borrower to obtain another loan that will take lien priority to cover the costs of construction on the property as long as it's not more than $100,000.

"Lender agrees that this instrument shall be subordinate to a lien to be given by Borrower to secure funds for the construction of improvements on the Property provided that said lien is duly recorded and the amount secured by said lien does not exceed $100,000."

What's the minimum time required between the time a Notice of Trustee's Sale is recorded and the day the sale takes place?

90 days

Let's start with the basics. What is a land contract, also known as an agreement for sale?

A contractual agreement in which the buyer pays the seller the purchase price over time in a series of installments until the buyer has paid the contract in full, then the seller turns over the deed to the buyer

Since lenders can choose to use either judicial or non-judicial foreclosure in Arizona, what makes them prefer to use the non-judicial process?

A non-judicial foreclosure is usually faster and less costly than a judicial foreclosure.

Select the scenario that accurately describes redemption after a judicial foreclosure in Arizona.

After the sheriff's auction where Jesse's home was sold to the highest bidder, he lived with his mom for three months. Then he won the lottery and was able to redeem his former abode by paying the buyer the auction price plus 8%.

Nick's been a good homeowner and always paid his bills on time, but life suddenly goes downhill for him when he's diagnosed with a serious illness. As time goes by, he can no longer work, his bills pile up, and he's in default on his home loan. He knows his lender will foreclose soon. What's Nick's most likely option in this sad scenario?

Bankruptcy will prohibit his lender from foreclosing, though his credit score will take a huge hit. Here's the good news: Nick eventually recovered from his illness and his financial woes, and is shopping for a home again. Thank goodness for happy endings!

Is an informal method to make additional payments to the principal.

Extra principal payments

Murray is an investor who bids on foreclosure properties and resells his purchases as soon as possible. He avoids sheriff's sales, and only attends trustee sales. Why?

He wouldn't be able to resell the property until after the redemption period was over, in case the borrower was able to pay funds owed and reclaim the property.

Sue is the winning bidder at an Arizona sheriff's sale. When she pays the sheriff, she receives a certificate of sale. Why?

It serves as proof of ownership until the redemption period is over.

The lender must file a court action and receive a judgment to initiate foreclosure.

Judicial foreclosure

Seller Walt has an agreement for sale with buyer Jessie, who's agreed to buy Walt's property just outside Prescott. Two years later, Jessie defaults on the loan. He's paid Walt $75,000 of the $100,000 purchase price and still owes 25%. Walt is allowed to start forfeiture proceedings ______ after Jessie's first missed payment.

Nine months. Since Jessie has paid more than 50% of the original purchase price, Arizona law doesn't allow Walt to start the forfeiture process until Jessie's been in default for nine months.

A power-of-sale clause in the security instrument gives the lender the right to foreclose if the borrower defaults.

Non-judicial foreclosure

Includes shorter time frames, higher monthly payments, and less total interest.

Non-judicial foreclosureThe borrower is allowed to prepay the loan without penalty.Reduced loan term

An Arizona non-judicial foreclosure using a deed of trust follows this process.

Pre-foreclosure Notice of Trustee's Sale Posting/publishing notice of the sale Trustee's sale and bidding process After the trustee sale

Provided to the purchaser at auction after payment on the winning bid

Sheriff's certificate of sale

Provided to the foreclosure purchaser after the redemption period

Sheriff's deed

Property auction conducted by (you guessed it!) the county sheriff

Sheriff's sale

Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."

The borrower is allowed to prepay the loan without penalty.

Which of these steps does an Arizona lender take after borrower default on a loan secured by a mortgage?

The lender accelerates the loan and files a court action requesting foreclosure.

An Arizona lender forecloses judicially on a residential property on an urban street. What situation would cause the redemption period after the sale to be shortened to 30 days?

The property was considered abandoned.

Bob and Sonja Hill are both teachers. When Bob loses his job, he quickly finds another, but it pays significantly less. Their home loan payments are suddenly more difficult to stay on top of, even though their income is stable and their credit is good. What option might they use to avoid defaulting on their loan?

They could ask their lender for a loan modification. If they've got a good relationship with the lender, an adjustment to their interest or to the term of the loan may be just what's needed to keep default and foreclosure at bay.

Anyone who proves he has $10,000 in cash can bid.

This is false. A $10,000 deposit to the trustee is required in order to be an eligible bidder (unless you're the lender).

The person who wins the property must pay in cash within 10 days of the auction.

This is false. The winning bidder must pay in cash, but must do so by the end of the next business day.

What is the trustee's role when a deed of trust is used to secure property for a loan?

To hold legal title to the property on behalf of the beneficiary until the loan is repaid. When a deed of trust is used in a title theory state, the trustee holds legal title to the property on behalf of the beneficiary.

How many parties does a mortgage involve?

Two: borrower and lender

Veronica bought her home when prices were high, and now she's underwater on her loan. When she can't make the loan payments because she's lost her income, she's notified that her lender is foreclosing. When an investor contacts her shortly thereafter and offers her market value for the property, which alternative to foreclosure is Veronica looking at?

Veronica can sell the property to the investor in a short sale, as long as her lender agrees to the transaction.

Wendy lost her job and ended up defaulting on her loan. Her lender started foreclosure proceedings. Then—hallelujah!—Wendy not only got a new job, but her aunt offered to help her out financially, too. Assuming it's a non-judicial foreclosure, which of these statements is true?

Wendy doesn't have the right of redemption, but she can reinstate the loan if she acts before the foreclosure sale happens. With a non-judicial foreclosure, Wendy has the right of reinstatement, but not the right of redemption (she doesn't get to choose). Reinstating the loan before the foreclosure sale means she's paying what's needed to bring the loan current and paying the lender for any costs related to the foreclosure process. Then she and the lender will pretend it never happened and continue on their merry way together until Wendy has paid off the loan over its remaining term.

"Upon payment of all sums secured by this Mortgage, Mortgagee shall discharge this Mortgage without cost to Mortgagor. Mortgagor shall pay all costs of recordation, if any."

When the borrower has fully paid off the loan, the lender will record that the note is satisfied.

You'll notify the trustor and the beneficiary of the sale details within five days after recording. The date of the sale is set for the end of September, which is more than the required 90 days from the date of recording. You'll post the notice at least 20 days prior to sale and publish the notice for four consecutive weeks, with the last publication at least 10 days prior to the sale. As long as Ted doesn't reinstate the loan by 5 p.m. the business day before the sale date, you'll be ready to auction off the property.

YES

Arizona's judicial foreclosure process is much less commonly used. After a borrower defaults, the lender may choose to foreclose judicially because the security instrument demands it (most likely because the loan is secured using a mortgage rather than a deed of trust and doesn't include a power-of-sale clause), or because a judicial foreclosure will offer the lender different rights. Here's how the process and timeline work after a default.

`Step one: The lender files for foreclosure in court. Step two: The foreclosure judgment is issued. Step three: The sheriff posts the required notice of sale. Step four: The sheriff's sale takes place. Step five: The redemption period concludes, and the sheriff's deed is issued.

Gerard has been offered a 4% interest rate on a $300,000 mortgage. His monthly mortgage payment would run about $950 per month. He plans to pay $2,000 up front to drop his interest rate to 3.75% and his payment to $920 per month. What is this upfront charge called?

discount point

The borrower has the right to redeem the property after the foreclosure auction.

judicial

The lender must record a lis pendens.

judicial

The property is sold at an auction called a sheriff's sale.

judicial

The costs of the foreclosure sale Payment of the outstanding balance on the deed of trust loan Payment of any other lender expenses secured by the deed of trust that was foreclosed Condominium or homeowners association fees Junior lien holders and other encumbrances, in order of priority The former homeowner/borrower

neighhh

The borrower can reinstate the loan prior to foreclosure without paying the full principal balance.

non judicial

The property is sold at an auction called a trustee's sale.

non judicial

What information is found in paragraph four of the note?

prepayment clause. The complete clause makes it clear how the prepayment will be applied, and that the borrower will not be charged a fee for prepayment.

In a land contract, which party finances the purchase of the property?

seller

If a negotiable instrument is transferrable, it must be ___________.

signed

The beneficiary is allowed to bid and also is the only one who can make a "credit bid."

true

The property goes to the highest bidder who meets the lender's minimum.

true

Under an agreement for sale, the seller isn't allowed to start forfeiture proceedings as soon as the buyer misses a payment (which is possible when a lender forecloses). Instead, the law creates some limits. What are those limits based on?

xThe amount of the purchase price the buyer has already paid

The sheriff's sale date is set according to the direction in the judgment. The sheriff's office posts notice of the sale at the courthouse and in at least two other public places. The postings must be in place for 15 days before the sale date. The sheriff also publishes notice in a newspaper for the three weeks prior to the sale.

yeet

With a judicial foreclosure, the lender asks the judge to make a decision in the lender's favor. Non-judicial foreclosures are allowed without that action because of the terms of agreement when the borrower signed the deed of trust.

yes

land contracts are often the way to go for buyers who can't obtain regular financing or who don't have enough saved for a traditional down payment.

yup

Requires a formal arrangement with the lender to divide payments into smaller chunks.

Biweekly payments

A junior lien holder in Arizona can protect its interests in a foreclosure sale by ______.

Curing the default of prior liens. Foreclosures are complicated processes, and everyone's out to protect their own interests. That's why the law is specific about what can and can't happen, such as the junior lien holder's right to cure the default for a prior loan secured by the same property.

The Sandersons have a large family, and one of their sons is in an accident. He's recovering, but in spite of their medical insurance, they have a sudden onslaught of high medical bills. Their income and savings won't stretch to cover both the medical bills and the mortgage. They don't want to default on their mortgage. What option might they pursue with their lender in order to avoid foreclosure?

If they can prove to their lender that a forbearance will help them avoid defaulting on the loan, and that their financial situation will improve soon, the lender will likely see this as the easiest and cheapest way to handle the loan.

Lendright Home Loans asked a trustee to begin foreclosure proceedings as permitted by the power-of-sale clause in the security instrument. This action does not need to involve the courts. What type of foreclosure process is being used?

Non-judicial foreclosure

"Mortgagor may prepay the principal amount outstanding in whole or in part. The Note holder may require that any partial prepayments (i) be made on the date monthly installments are due and (ii) be in the amount of that part of one or more monthly installments which would be applicable to principal. Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."

The borrower is allowed to prepay the loan without penalty. Most conventional residential loans don't allow the lender to charge a prepayment penalty.

Sheila's financing calls for the use of a promissory note. What's a promissory note?

The borrower's promise to repay a certain sum of money to another party (the lender or holder of the note) under specified terms

At a foreclosure sale, a deficient bid is one that isn't high enough to cover the full amount owed to the lender. If the property is one that allows a deficiency judgment, how will the amount of the deficiency be determined?

The court takes the full amount the borrower owes to the lender as of the date of the foreclosure sale and subtracts either the foreclosure sale price or the market value of the property, whichever is greater. The court seeks to find a fair amount for the deficiency, so it decides what the fair market value of the property is first. If that's more than what the property sold for at foreclosure, then that amount is used to determine the deficiency. This makes the borrower liable for the least amount possible, rather than the greatest amount.

Darrin's home is sold at a trustee's sale. Along with his original loan to buy the home, he had subsequently taken out a home equity loan that still had an outstanding balance of $3,000. What happens to this loan after the foreclosure?

The lien is extinguished with the foreclosure sale, but Darrin still owes the debt to the lender, which may pursue him for it under the promissory note he signed. The lien is extinguished because Darrin no longer owns the property. But there's still a debt, even without the lien, because Darrin signed a promissory note promising to repay the lender. The lender can pursue Darrin for the debt.

As the trustee, you'll conduct the auction.

This is true. The law also gives you the option to hire an attorney or agent to act as the auctioneer on your behalf. And yes, a real estate broker is allowed to auction real estate in Arizona.

What clause allows the lender to make the entire loan due and payable immediately if the property is sold?

alienation clause

The anti-deficiency statutes give protection against deficiency judgments when the property is 2.5 acres or less and has a one- or two-family dwelling. Only Jonathan's four-unit apartment building falls outside of that description. It doesn't matter if the foreclosure is non-judicial or judicial. Previous

yup

The sheriff's sale takes place "at or near the courthouse door." The highest bid wins. The winning bidder must pay the bid price within five business days. The sheriff issues a certificate of sale, which gives the buyer title to the property. The judgment is credited for the sale price or the property's fair market value as determined by the court, whichever is greater.

yup