Chat with AIExam 31: Mortgages Foreclosures After the Recession
Jaime buys a home by paying part of the purchase price up front in cash and borrowing the rest of the funds from Valley Credit Union.The part of the price paid up front in cash is
(85) 
VerifiedA
Brendan borrows $150,000 from Countywide Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.5 percent with a thirty-year term secured by Brendan's home,which is his principal residence.When Brendan has paid off $10,000 of the mortgage-still owing $140,000-he loses his job and defaults on the loan.The market for homes has declined since Brendan took out the loan,and the value of the home at the time of default is $100,000.Despite the default,Brendan assures Countywide that he has accepted a new position,which will begin in six months.What are Brendan's options to recover the amount still owed on the mortgage? Which option would most benefit these parties? Why?
(74) VerifiedCountrywide's options include forbearance,a workout agreement,a U.S.Department of Housing and Urban Development (HUD)loan,a short sale,a sale and leaseback arrangement,the U.S.Treasury Department's Home Affordable Modification Program (HAMP),a deed in lieu of foreclosure,and a prepackaged bankruptcy.Foreclosure is also an option. Forbearance is the postponement of part or all of the payments of a loan in danger of foreclosure.This may be based on a borrower's securing a new job,selling the property,or some other factor.A workout is a voluntary attempt to cure a default under which,for example,a lender may agree to delay foreclosure in exchange for a borrower's financial information.An interest-free loan may be obtained from the U.S.Department of Housing and Urban Development (HUD)to bring a mortgage current under certain requirements,including the borrower's ability to make full payments.A short sale is a sale of property for less than the balance due on a mortgage.A borrower-who typically must show some hardship-sells the property with the lender's consent,and the lender gets the proceeds.In a sale and leaseback deal,an investor buys the property and leases it back to its former owner for less than the mortgage payments.The seller-owner pays off the mortgage with the sale proceeds.HAMP encourages private lenders to modify mortgages to lower the monthly payments of borrowers in default (to 31 percent of the debtor's gross monthly income).A deed in lieu of foreclosure conveys property to a lender in satisfaction of a mortgage.This option works best when the property's value is close to the outstanding loan principal.A prepackaged bankruptcy allows a borrower to negotiate the terms with his or her creditors in advance. In this problem,because the market value of the home has declined,it would be unlikely to bring enough on a short sale or a foreclosure sale to recover the unpaid amount of the loan,plus the lender's fees and costs,so a deficiency judgment would be needed.The best option among this list would most likely be forbearance or a workout agreement.The lender could ask for proof of the borrower's pending employment and agree to postpone efforts to collect the unpaid amounts of the mortgage,as well as the next six payments.This action would save both parties expense and the negative effects,particularly to the borrower's credit rating,of some of the other options.
Great Plains Bank provides a loan to enable Helene to buy real property.This loan is
(84) VerifiedB
Federal law encourages private lenders to modify mortgages so as to lower the monthly payments of borrowers who are in default.
(88) Borrowers are required to recite the terms of their loans in clear,readily understandable language so that lenders can make rational choices.
(86) Fact Pattern 31-1A (Questions A12-A14 apply)
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 31-1A.Under federal law,if 24-Hour Credit fails to provide certain material disclosures with respect to the loan,Benny's right to rescind the loan
(86) Reed borrows $150,000 from Suburban Credit Union to buy a home,which secures the loan.Three years later,Reed stops making payments on the loan.After Suburban Credit repossesses and auctions off the property to Tyler,equity remains.This amount most likely belongs to
(88) Federal mortgage disclosure requirements apply to the written materials that a lender provides and to any oral representations.
(84) A deficiency judgment requires a borrower to pay the amount of debt remaining after the collateral is sold.
(80) If a homeowner defaults,the lender has the right to foreclose on the mortgaged property.
(80) Rita borrows $30,000 from South State Credit Union.South State accepts Rita's equity in her home as collateral,which can be seized if the loan is not repaid on time.This is
(77) Fact Pattern 31-1A (Questions A12-A14 apply)
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 31-1A.24-Hour Credit assigns Benny's loan to Consolidated Mortgage Investment Corporation.For most purposes,Consolidated
(80) In a judicial foreclosure,the lender is allowed to foreclose on and sell the property without judicial supervision.
(85) Property Financial Corporation makes loans that qualify,under a Federal Reserve Board amendment to Regulation Z,as Higher-Priced Mortgage Loans (HPMLs).Quinn applies to Property Financial for an HPML.To make the loan,the lender must
(91) Seymour borrows $350,000 from Reliable Bank to buy a home.Seymour stops making payments on the loan ten months later.After the bank repossesses the property securing the loan but before it is sold,Seymour wants to buy it.This is
(82) Ridgeline Bank provides Stanley with a mortgage to buy a home.The rate of interest is fixed for three years and then adjusts annually.This is
(66) Kenton borrows $150,000 from Liberty Home Finance Corporation to buy a home.Federal law concerns primarily
(85) A reverse mortgage starts as a fixed-rate mortgage and then converts into an adjustable-rate mortgage.
(88) Ruth owns a home on which she has two mortgages provided by Security Bank.Town Refinance Inc.tells Ruth that it can refinance the loans to reduce her payments.Town Refinance provides all of the required documents,which accurately state the payments under the new loan as higher.Ruth does not read the documents.Town Refinance is most likely liable for
(80) 
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