Exam 28: Introduction to Credit and Secured Transactions

Abby borrows money from Cain Bank and Baker cosigns on the loan contract. Abby fails to repay this loan and Cain Bank collects the debt from Baker. Baker is entitled to recover the amount he paid to the bank from Abby. This is known as the:

A surety who pays a debtor's debt to the creditor gets all the rights the creditor had against the debtor. This is called subrogation.

Bob borrowed $200,000 from ABC Bank to purchase his residential house. A mortgage was used as the financing vehicle. Several years later Bob encountered financial difficulties. He did not pay his mortgage payments for 4 months and the bank foreclosed. At that time the remaining loan balance was $170,000. Bob had not maintained the property well, and the winning bid at the foreclosure auction sale was only $150,000. Is Bob liable for the $20,000 deficiency that has resulted (using the majority rule)?

Which of the following is the oldest and also the simplest security device?

Xavier deeds to Peter, a trustee, his property in form of security, for the loan, which is lent by Smith, the beneficiary of the trust. The nature of this transaction renders it as a deed of trust. Under these circumstances, if Xavier defaults to pay the loan, which of the following is the appropriate way in which Smith can recover his loan?

Which of the following is generally true about state statutes establishing mechanic's and materialman's liens?

Under the Pennsylvania system, the general contractor's failure to perform his contract or his abandonment of the work has a direct effect on the lien rights of subcontractors and materialmen.

John receives certain goods from Tom. He promises to pay John later. This transaction is based on a(n) _____.

A surety has a right of exoneration.

Under the _____ system, the subcontractors or materialmen have direct liens and are entitled to liens for the value of labor and materials furnished, irrespective of the amount due from the owner to the contractor.

Mike operates an upholstering business. He goes to Hans' house to reupholster a sofa for Hans. After the work was complete, Hans refused to pay the agreed price. Mike wants to assert a lien against the sofa in order to collect the money due to him. Is Mike entitled to a lien under these circumstances?

In a(n) _____ transaction, the borrower keeps the title of his real property with a third party and in the event of default, the third party can sell the property so that the creditor can recover his loan.

Which of the following statements is true regarding an accommodation surety?

Generally, purchases of farm property are financed through real estate mortgage.

A(n) "_____" is a person who is liable for the payment of another person's debt or for the performance of another person's duty.

Tina cosigns a promissory note at Globe Bank for $500.00 for her friend Tom. Tom defaults on the loan, and Globe Bank collects $500.00 from Tina. Tina then collects $500.00 from Tom. Tina could collect money from Tom because of her right of _____.

Foreclosure is the process by which any rights of the mortgagor or the current property owner are cut off.

_____ is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.

Submaterialmen are entitled to a lien only when:

In the case of _____, after the foreclosure, the proceeds of the sale are applied to the payment of the mortgage debt, and any surplus is paid over to the mortgagor.