978-1259919688 Chapter 2

Solutions to Questions – Chapter 2

Real Estate Financing: Notes and Mortgages

Question 2-1

Question 2-2

What does default mean? Does it occur only when borrowers fail to make scheduled loan payments?

Question 2-3

What is meant by mortgage foreclosure, and what alternatives are there to such action?

Question 2-4

What does it mean when a lender accelerates on a note? What is meant by forbearance?

Question 2-5

Can borrowers pay off, part or all, of loans anytime that they desire?

Question 2-6

What does non-recourse financing mean?

Question 2-7

What does assignment mean and why would a lender want to assign a mortgage loan?

Question 2-8

What is meant by a “purchase money“ mortgage loan? When could a loan not be a purchase money mortgage?

Question 2-9

When might a borrower want to have another party assume his liability under mortgage loan?

Question 2-10

What does deficiency judgment mean?

Commented [t1]: MP: please re-order questions based on new

Question 2-11

What is a land contract?

Question 2-12

How can mechanics’ liens achieve priority over first mortgages that were recorded prior to the mechanics’ lien?

Question 2-13

Name possible mortgageable interests in real estate and comment on their risk as collateral to lenders.

Question 2-14

Explain the difference between a buyer assuming the mortgage and taking title “subject to” the mortgage.

Question 2-15

What dangers are encountered by mortgagees and unreleased mortgagors when property is sold “subject to” a

mortgage?

Question 2-16

What is the difference between the equity of redemption and statutory redemption?

Question 2-17

What special advantages does a mortgagee have in bidding at the foreclosure sale where the mortgagee is the

foreclosing party? How much will the mortgagee normally bid at the sale?

Question 2-18

Is a foreclosure sale sometimes desirable or even necessary when the mortgagor is willing to give a voluntary deed?

Question 2- 19

What are the risks to the lender if a borrower declares bankruptcy?

Question 2- 20

What is a deficiency judgment and how is its value to a lender affected by the Bankruptcy Code?

Problem 2-1

Problem 2-2

Generally, in addition to the $80,000 first lien, the lender also has first lien on any improvements made on land serving as

Problem 2-3

Mrs. Brown has probably violated a covenant in the mortgage agreement (see: preservation and maintenance of the property)