Question 1

Land sales contracts are often used for developed property.

Accepted Answer

A) True 
 B)False  False

Question 2

The non-recordation of a mortgage or deed of trust does not affect either the legality of the instrument between the mortgagor and the mortgagee or the rights and obligations of the parties.

Accepted Answer

A) True 
 B)False  True

Question 3

Bernie purchases a house for $100,000.He puts $20,000 down,and borrows $80,000 from ABC Bank.ABC Bank does not record the mortgage.Bernie has expensive taste.He later goes to DEF Bank and obtains another $80,000 loan on the house.DEF records the mortgage.Bernie subsequently defaults on both mortgages.What are the rights of the banks?

Accepted Answer

A)  The first bank to file has the right to take the house. 
B)  ABC has a superior claim to the home because it made the first mortgage to Bernie. 
C)  DEF has a superior claim to the home because it recorded the mortgage. 
D)  Both banks are out of luck. 
A)  The first bank to file has the right to take the house. 
B)  ABC has a superior claim to the home because it made the first mortgage to Bernie. 
C)  DEF has a superior claim to the home because it recorded the mortgage. 
D)  Both banks are out of luck. C

Question 4

When a debtor fails to pay a debt,and the value of the collateral is less than the full amount of the debt,which of the following is generally true?

Accepted Answer

A)  The creditor can obtain a deficiency judgment against the debtor for the amount of the debt that was not satisfied from the collateral. 
B)  The creditor must absorb the remaining loss and has no further remedy. 
C)  The creditor must file a bankruptcy proceeding against the debtor in order to obtain further relief. 
D)  The creditor must record its security interest before proceeding further. 
A)  The creditor can obtain a deficiency judgment against the debtor for the amount of the debt that was not satisfied from the collateral. 
B)  The creditor must absorb the remaining loss and has no further remedy. 
C)  The creditor must file a bankruptcy proceeding against the debtor in order to obtain further relief. 
D)  The creditor must record its security interest before proceeding further.

Question 5

If a creditor repossesses a debtor's property and sells it,the proceeds must be applied to the outstanding debt.

Accepted Answer

A) True 
 B)False

Question 6

A lien release is a document signed by a contractor,laborer,or material person enforcing his or her statutory lien against the property owner.

Accepted Answer

A) True 
 B)False

Question 7

Is a residential homeowner's right of redemption too great a protection for the homeowner? If someone has purchased a home at a foreclosure sale,why should the homeowner in default be able to redeem the property after the fact?

Accepted Answer

The law does not like to see homeowners

Question 8

A note is an instrument that gives the creditor a security interest in the debtor's property that is pledged as collateral.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following best describes how a deed of trust works?

Accepted Answer

A)  The state gives a deed to the lender to hold until the borrower satisfies the debt. 
B)  The borrower gives a deed to the lender to hold until the borrower satisfies the debt. 
C)  When a party borrows money to purchase property,the seller holds the deed until the debt is paid off,at which point it will be conveyed to the borrower. 
D)  When a trust is the owner of real property,a special type of deed is required. 
E)  The borrower conveys a deed to a third party who holds legal title until the debt is paid off or the borrower defaults. 
A)  The state gives a deed to the lender to hold until the borrower satisfies the debt. 
B)  The borrower gives a deed to the lender to hold until the borrower satisfies the debt. 
C)  When a party borrows money to purchase property,the seller holds the deed until the debt is paid off,at which point it will be conveyed to the borrower. 
D)  When a trust is the owner of real property,a special type of deed is required. 
E)  The borrower conveys a deed to a third party who holds legal title until the debt is paid off or the borrower defaults.

Question 10

Mechanic's liens are usually subject to the debtor's right of redemption.

Accepted Answer

A) True 
 B)False

Question 11

Generally,a creditor would rather be a secured creditor than an unsecured one.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following must be recorded in order to gain priority over later security interests in the same parcel of property?

Accepted Answer

A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage 
A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage

Question 13

Are the various requirements for filing mortgages and other security interests too burdensome on creditors? Do they work too much to the benefit of debtors?

Accepted Answer

The filing requirements do not affect th

Question 14

A deed of trust is a three-party arrangement to secure a loan with real property.

Accepted Answer

A) True 
 B)False

Question 15

Foreclosure is another word for the taking of possession of collateral.

Accepted Answer

A) True 
 B)False

Question 16

Mike has a long history of purchasing items on credit.At the present time,Mike has six secured creditors to whom he owes a total of $60,000 and two unsecured creditors to whom he owes $30,000.Mike recently was laid off from his job.It appears that he will have a difficult time finding a new job,and any job he finds will likely carry a salary lower than the job that he recently lost.What factors should a secured creditor consider in deciding whether to enter into a composition agreement? How would the analysis be different for unsecured creditors?

Accepted Answer

A secured creditor would consider the am

Question 17

The recording of a mortgage does not affect the rights and duties of the borrower and lender with respect to one another.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a three-party instrument?

Accepted Answer

A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage 
A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage

Question 19

Which of the following is commonly used to create a security interest in real property to secure a loan?

Accepted Answer

A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage 
A)  deed of trust 
B)  mortgage 
C)  both a deed of trust and a mortgage 
D)  neither a deed of trust nor a mortgage

Question 20

What does a right of redemption allow in connection with a mortgage or deed of trust?

Accepted Answer

A)  It allows the granting of a second mortgage on the same property that is already secured. 
B)  It allows the lender to use the property to satisfy the debt if it goes into default. 
C)  It allows the use of a deed of trust arrangement in place of a conventional mortgage. 
D)  It allows the ability to foreclose on the property without court action. 
E)  It allows the borrower to recover foreclosed property by paying off the related debt. 
A)  It allows the granting of a second mortgage on the same property that is already secured. 
B)  It allows the lender to use the property to satisfy the debt if it goes into default. 
C)  It allows the use of a deed of trust arrangement in place of a conventional mortgage. 
D)  It allows the ability to foreclose on the property without court action. 
E)  It allows the borrower to recover foreclosed property by paying off the related debt.

Exam 26: Creditor's and Debtor's Rights

Land sales contracts are often used for developed property.

The non-recordation of a mortgage or deed of trust does not affect either the legality of the instrument between the mortgagor and the mortgagee or the rights and obligations of the parties.

When a debtor fails to pay a debt,and the value of the collateral is less than the full amount of the debt,which of the following is generally true?

If a creditor repossesses a debtor's property and sells it,the proceeds must be applied to the outstanding debt.

A lien release is a document signed by a contractor,laborer,or material person enforcing his or her statutory lien against the property owner.

Is a residential homeowner's right of redemption too great a protection for the homeowner? If someone has purchased a home at a foreclosure sale,why should the homeowner in default be able to redeem the property after the fact?

A note is an instrument that gives the creditor a security interest in the debtor's property that is pledged as collateral.

Which of the following best describes how a deed of trust works?

Mechanic's liens are usually subject to the debtor's right of redemption.

Generally,a creditor would rather be a secured creditor than an unsecured one.

Which of the following must be recorded in order to gain priority over later security interests in the same parcel of property?

Are the various requirements for filing mortgages and other security interests too burdensome on creditors? Do they work too much to the benefit of debtors?

A deed of trust is a three-party arrangement to secure a loan with real property.

Foreclosure is another word for the taking of possession of collateral.

The recording of a mortgage does not affect the rights and duties of the borrower and lender with respect to one another.

Which of the following is a three-party instrument?

Which of the following is commonly used to create a security interest in real property to secure a loan?

What does a right of redemption allow in connection with a mortgage or deed of trust?

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