Chapter 12 Section 3

Question 1

a property that is mortgaged can be sold in these ways

Answer 1

-cash sale
-assumption of the mortgage
-assumption with novation
-subject to the mortgage

Question 2

assumption of the mortgage

Answer 2

-mortgages that do not contain a due-on-sale clause can be assumed by a buyer without permission of the lender
-nonqualifying mortgages
-original borrower becomes guarantor
-in the case of default, lender looks to buyer, if that does not satisfy, the lender looks to original buyer

Question 3

assumption with novation

Answer 3

-mortgages that contain a due-on-sale clause cannot be sold with an assumption without the knowledge and approval of the lender
-assumptions with qualifying mortgages
-lender removes the seller’s name and replaces it with buyers name
-lender only looks to buyer in the case of default

Question 4

subject to the mortgage

Answer 4

-if a mortgaged property is sold subject to the mortgage, the new owner acquires ownership without assuming personal responsibility for the balance of the promissory note
-when a property is sold subject to the mortgage, only the original borrower remains liable for the balance of the promissory note
-if a deficiency exists following foreclosure, the buyer is not responsible, only the original borrower

Question 5

contract for deed

Answer 5

-an agreement between a property owner and a potential buyer in which the owner agrees to deliver a deed to the purchaser after certain conditions have been met
-buyer makes down payment to the seller and continues to make payments over a period-of-time similar to mortgage payments

Question 6

blanket mortgage

Answer 6

-a single mortgage given by a borrower that pledges two or more parcels as security for a loan

Question 7

partial release clause (blanket mortgage)

Answer 7

-allowing the borrower to pay a specified amount to release a single lot from the blanket so it can be sold to a buyer upon completion of construction

Question 8

take-out commitment

Answer 8

-a long-term investor agrees to buy a mortgage from a mortgage banker at a specific date in the future

Question 9

estoppel certificate

Answer 9

-a letter that verifies the principal balance owed on the loan

Question 10

selling the mortgage contract

Answer 10

-a mortgage is the personal property of the lender
-the lender may wish to sell the right to receive the income from the loan to another investor
-the original lender typically continues to service the loan and sending payments to the investor