Deck 10: Legal Aspects of Real Estate Finance

Question 1

A maker of a note is released by the sale of the collateral securing the note.

Answer 1

False

Question 2

An unqualified endorsement imposes upon the endorser the obligation to pay the note in the event the maker does not.

Answer 2

True

Question 3

Only a negotiable note can be transferred to a holder in due course.

Answer 3

True

Question 4

Incapacity of the maker is not a defense to a holder in due course.

Question 5

An endorsement without recourse negates any obligation on the part of the endorser to pay the note.

Question 6

Notes are often transferred by their makers.

Question 7

Usury statutes establish a minimum rate of interest that can be charged on the loan.

Question 8

A state statute that establishes a ceiling or maximum rate of interest to be charged on a loan is called a usury statute.

Question 9

Nonnegotiable notes are not enforceable.

Question 10

The method of transferring a note is by endorsement.

Question 11

Only a nonnegotiable note can be transferred to a holder in due course.

Question 12

An unqualified endorsement contains no warranties.

Question 13

Generally, a note cannot be prepaid before the date established in the note for payment.

Question 14

A note signed by both A and B on which they have joint and several liability is one on which A
is responsible for one-half of the note and B is responsible for one-half of the note.

Question 15

Each comaker of a note is fully responsible for the payment of the note.

Question 16

Forgery of a maker's signature is a defense to a holder in due course.

Question 17

A nonnegotiable note may be enforceable.

Question 18

A nonnegotiable note is not capable of being transferred.

Question 19

A maker of a note is not released by the sale of the collateral securing the note.

Question 20

An endorser who endorses a note without recourse warrants that all signatures on the note are genuine and authorized.

Question 21

A change in the terms of a guaranteed note made without the guarantor's consent generally
releases the guarantor.

Question 22

Notes are rarely witnessed and notarized.

Question 23

The mortgagee of a mortgage is the owner of the property.

Question 24

Most notes are witnessed and notarized.

Question 25

Property sold with a mortgage assumption means that the purchaser does not have personal liability to pay the debt.

Question 26

Power of sale foreclosure is generally a nonjudicial foreclosure proceeding.

Question 27

If property is sold subject to a debt, it means that the purchaser does not have personal liability to pay the debt.

Question 28

All foreclosures must take place through judicial proceedings.

Question 29

A promise to pay the debt of another person is called a guaranty.

Question 30

The penalty for usury in some states may be forfeiture of the entire loan amount.

Question 31

Foreclosures may take place either judicially or nonjudicially.

Question 32

A mortgage securing a note can be transferred separately from the note.

Question 33

A mortgage cannot be given to secure a future debt.

Question 34

Power of sale foreclosure is generally a judicial foreclosure proceeding.

Question 35

An oral guaranty is enforceable.

Question 36

A foreclosure of a first mortgage will generally terminate a second mortgage lien on the secured property.

Question 37

The legal means of requiring that real property conveyed in a mortgage be sold and the proceeds used to pay the debt is called foreclosure.

Question 38

A guaranty of a note must be written.

Question 39

The mortgagor of a mortgage is the lender or creditor.

Question 40

To have a valid mortgage, a valid debt must exist.

Question 41

A foreclosure sale generally has the effect of divesting and terminating all junior encumbrances on the real property.

Question 42

Which of the following is/are true about a bankrupt debtor?

A) Bankruptcy enjoins all foreclosure proceedings against the debtor.
B) A bankrupt debtor can terminate executory contracts to purchase real property.
C) A bankrupt debtor can terminate unexpired leases.
D) All of the above
E) (a) and (c)

Question 43

A debtor always has the right to pay off the debt and redeem the real property from foreclosure prior to the sale.

Question 44

Which of the following is not a mortgagee's remedy for a debtor's default on a mortgage?

A) Judicial foreclosure
B) Nonjudicial foreclosure
C) Appointment of a receiver
D) Injunction

Question 45

Post-foreclosure redemption is permitted in all states.

Question 46

Which of the following is/are requirements for a valid mortgage?

A) Names of the parties
B) A valid description of the property
C) Effective delivery to the lender
D) All of the above
E) (a) and (b)

Question 47

Anti-deficiency laws generally provide that a mortgage creditor cannot sue a mortgage debtor for a deficiency owed on the debt unless the creditor can establish that the property sold for fair market value at the foreclosure sale.

Question 48

Great Land Investment Company owned vacant land that it intended to develop into a residential subdivision. Great Land had borrowed money to buy the land from Big Town Bank and given Big Town Bank a mortgage on the land. Great Land sells the property to Quality Homes who intends to develop the land. The land is transferred to Quality Homes "subject to" the Big Town Bank Mortgage. Quality gets into financial trouble and cannot pay the loan. Big Town Bank wants to su e Quality Homes for the full amount of the unpaid debt. Will Big Town Bank be successful in this action?

Question 49

A person other than the debtor or maker of a note who promises the payee of the note that the debtor's note will be paid is called:

A) endorser.
B) receiver.
C) guarantor.
D) comaker.

Question 50

A debtor's rights in bankruptcy are determined by:

A) the law of the state where the debtor resides.
B) the law of the state where the creditor resides.
C) federal law.
D) the law of the state where the property is located.

Question 51

Which of the following is not a defense to a holder in due course?

A) Fraud in the inducement
B) Forgery of the maker's signature
C) Payment to the wrong person
D) Duress of the maker in signing the note

Question 52

A state statute that establishes the ceiling or maximum rate of interest to be charged on a loan is a(n):

A) usury statute.
B) foreclosure statute,
C) redemption statute,
D) endorsement statute,

Question 53

Acme Bank is the payee on a negotiable note made by Taylor Reed. Acme Bank sells the note to XYZ Investment Company. The note is endorsed by Acme " without recourse" to XYZ. After the sale, XYZ discovers that the signature of Taylor Reed on the note is a forgery. Taylor refuses to pay the note. Can XYZ recover its loss from Acme Bank?

Question 54

Josie Cohen borrowed money from Second Bank and Trust to buy her home. She gave Second Bank a mortgage on the home. Josie loses her job and is unable to make the payments on the mortgage. Second Bank gives Josie notice that the delinquent payments must be pai d by July 1 or the home will be foreclosed. Josie does not make the payments and Second Bank starts foreclosure proceedings. Josie obtains a loan from her aunt in an amount sufficient to pay off entirely the debt owed to Second Bank. Josie tenders the full amount to Second Bank, but Second Bank refuses to accept the money. Second Bank says that Josie was too late to stop the foreclosure. Can Josie require Second Bank to accept payment of its loan in full?

Question 55

A mortgage given to secure any and all debt between the mortgagor and the mortgagee is called a()

A) deed of trust.
B) wrap mortgage.
C) open-end mortgage.
D) installment mortgage.