BLAW Exam #4

who is required to pay an instrument without any reservations

(1) the maker of a note, (2) the issuer of a cashier's check or other draft in which the drawer and the drawee are the same person, (3) the acceptor of a draft.

when an indorser would be obligated to pay an instrument

1) The instrument must be properly presented to the drawee or party obliged to pay the instrument, and payment must be demanded; (2) the instrument must be dishonored—that is, payment refused; (3) notice of the dishonor must be given to the secondary party within the time and in the manner prescribed by the UCC

the warranties that an indorser for consideration makes to subsequent transferees

1. the indorser is entitled to enforce the instrument. This warranty gives assurances to subsequent holders that the person indorsing it did not steal it or come into possession of it in an unlawful manner. 2. the indorser warrants that all signatures are authentic and authorized. 3. the next warranty is that the instrument has not been altered. 4., the instrument is not subject to a defense of any party that can be asserted against the indorser. 5., the last warranty provides that the indorser has no knowledge of the bankruptcy of the maker, acceptor, or drawer.

how long an oral stop payment order is good

14 calendar days

the time limit for notifying a bank of a forged or altered check

30 days

the Check 21 Act

A 2003 law that allows banks and others to electronically process checks.

deed of trust

A formal written instrument that transfers legal ownership of real property to a third party while the mortgagor remains on the property. The third party holds certain rights to that property as security for the mortgagor's creditors.

NINJA loans

A loan that has been negotiated by a borrower with "no income, no job, and no assets."

special indorsement

An indorsement made by first writing on the back of a negotiable instrument an order to pay a specified person and then signing the instrument. Also called indorsement in full.

unqualified indorsement

An indorsement whereby the indorser promises to pay the holder or any subsequent indorser the amount of the instrument if the maker, drawer, or acceptor defaults on it.

liar loans

Loans that deliberately misstate the qualifications of a borrower to push a loan through the approval process.

Medicare

Most people 65 years of age and older are eligible, a federally funded health insurance program. Part A helps pay for inpatient hospital care. Part B pays for 80 percent of doctors' and other medical services.

Know about the personal defenses of lack of consideration and failure of consideration in the context of a holder in due course

No consideration existed in the underlying contract for which the instrument was issued.

personal defenses of failure of consideration in the context of a holder in due course

One of the parties to a contract has failed to furnish the agreed consideration.

securitization

The process of bundling securities and then selling them to big investors.

foreclosure

The right of a mortgagee to apply to a court to have property sold when the mortgagor defaults or fails to perform some agreement in the mortgage.

acceleration of the debt provision

a default on one installment payment will make the entire balance due immediately, giving the mortgagee the right to collect the full amount.

presentment

a demand made by a holder to pay or accept an instrument.

holder in due course

a holder of a negotiable instrument who is treated as favored and given immunity from certain defenses.

balloon-payment mortgage

a mortgage where the monthly payments are relatively low, but one large payment is required after a specified period to pay off the mortgage loan

what has to happen for a bank's settlement to be final

a payee cashes a check at a payor (drawee) bank

reverse mortgages

a type of loan that allows older homeowners to convert some of the equity in their home into cash while retaining ownership of their home. The loan is repaid when the property is sold, or on the occurrence of some other specified event.

what happens if a minor or mentally incompetent person signs a negotiable instrument

cannot issue a negotiable instrument; the instrument its void from its inception

what happens if any person materially alters an instrument after it leaves the hands of the maker

fine and imprisonment

secured loan

in which creditors have something of value, usually called collateral, from which they can be paid if the debtor does not pay

what type of insurance coverage a fixed-rate mortgage requires

involves no government backing by either insurance or guarantee.

Medicaid

is a health care plan for low-income people. State governments administer, which is funded by both state and federal funds.

the insurance company's liability is under comprehensive coverage

is limited to the actual cash value of the vehicle at the time of the loss.

tangible property

is property that has substance and can be touched, such as a book, a pair of jeans, or a cell phone. Also called goods, or chattels

right to equity in redemption

is the mortgagor's (debtor's) right to pay off the mortgage in full, including interest, and thus, discharge the debt in total.

an account owner's liability for unauthorized use (dollar amount)

limited to $50 only if you notify the issuer within two business days of the loss or theft of the card. Your liability increases to $500 if notice is delayed beyond that time, and it becomes unlimited when notice is not given within 60 days

what happens if a mortgage is recorded

notifies any third party who may be interested in purchasing the property or in lending money to the owner that the mortgagee has an interest in the real property covered by the mortgage

which situations a blank indorsement should be used

only in limited situations, such as at a bank teller's window.

add-on coverage

permits a driver to buy optional coverage such as personal injury insurance that would allow him or her to receive payment without bothering to determine fault. Add-on policies, however, would not prevent the insured from bringing a lawsuit for pain and suffering and other similar injuries

conditional indorsement

places a specific condition upon the right to the indorsee to collect on the instrument a type of restrictive indorsement, A person paying the instrument or taking it for value, however, may disregard the condition.

property damage liability insurance

provides protection when other people bring claims or lawsuits against the insured for damaging property such as a car, fence, or tree. The person bringing the claim or suit must prove that the driver of the motor vehicle was at fault.

collateral

something pledged as security for repayment of a loan, to be forfeited in the event of a default.

what happens if the "for deposit only" indorsement is used

the amount of the instrument is credited to the indorser's account before it is negotiated further. Retail stores often stamp each check "for deposit only" when it is received. This wording provides protection in the event the check is stolen

what happens if there is innocent misrepresentation by the insured

the contract is voidable by the insurer

what the words "without recourse" on an indorsement does

the indorser is not liable in the event the instrument is dishonored, that is, not paid by the maker or drawer.

what happens when there is a breach of warranty by the insured

the insurer may cancel the contract or refuse payment of loss to the insured or to a beneficiary.

uninsured-motorist insurance provides protection against

the risk of being injured by an uninsured motorist; provides no reimbursement for damages to the insured's property.

binder

will provide temporary insurance coverage until the policy is formally accepted. will include all of the usual terms that would be included in the actual policy to be issued.