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Unit 10: Defaults and Foreclosures
Terms in this set (31)
deed in lieu of foreclosure
he only time a foreclosure should ever be considered is when the current market value of the collateral property is actually less than the balance of the indebtedness and the borrower can no longer make the payment. Even under these extreme circumstances, a borrower should be aware that a foreclosure is not mandatory and that a
is the breach of one or more of the conditions or terms of a loan agreement.
If a lender receives less money than the entire loan balance, interest to date, and costs incurred as a consequence of a default after the delinquency, default, and foreclosure processes have been completed, the lender may pursue the borrower for these losses. The lender sues on the note and secures a deficiency
equitable redemption period
a borrower could secure a certain period beyond the default time in order to redeem the property. This could be accomplished by either bringing the payments current or repaying the total amount of the principal due in addition to interest owed and any court costs incurred.
To gain possession of the newly acquired property, in most states recognizing this foreclosure process, the successful bidder has to bring an action for
These partial or full payment waivers, described as
the borrower can solve the problem by securing a new job, selling the property to a buyer qualified to make the loan payments, or finding some other acceptable solution.
usually up to 15 days, in which to receive the regular payment.
involves the use of the courts and the consequent sale of the collateral at public auction. This foreclosure procedure is used in all states where a mortgage is used to establish collateral for a loan. States that use deeds of trust instead of mortgages to establish collateral for loans use a nonjudicial process, which is described later in this unit.
FHA and VA- conventional mortgages and use of courts
A moratorium is intended to allow the borrower to stabilize and then continue making payments to avoid foreclosure.
a lender or the trustee has the right to sell the collateral property upon default without being required to spend the time and money involved in a court foreclosure suit. In fact, under this form of lender control, a borrower's redemption time frame is shortened considerably by the elimination of the statutory redemption period granted in the judicial process.
most common is with deed of trusts/ non court use
to lower the payments to suit a borrower's damaged financial position
statutory period of redemption
the defaulted borrower was given another redemption period after the sale to recover the property before title to the collateral was transferred.
Complaints to the court of equity resulted in the decree of foreclosure, a legal process whereby the equitable period of redemption could be terminated under appropriate conditions.
used with land contracts- does not involve public auction
rights to the mortgagee against the mortgagor for the amount advanced. This means that the VA claim against the defaulted veteran takes priority over the rights of the mortgagee to these funds.
upside down or underwater
Although legally any default in a loan contract enables the lender to accelerate the debt, most lenders seek to avoid foreclosure and arrange a plan with the borrower to protect the interests of both parties and avoid costly, time-consuming court procedures. These efforts are called
and take the form of payment waivers, refinancing, or other arrangements designed to avoid a foreclosure.
The MOST common technique used for a delinquent FHA mortgage where it is determined that the default was caused by circumstances beyond the borrower's control is
The answer is forbearance of foreclosure for a one-year period. It is hoped that forbearance will allow the borrower to return to a secure financial position.
To provide relief to lenders when borrowers will not vacate their property after the equitable redemption period, a formal process was put in place that results in the decree of foreclosure. It is known as
In the foreclosure process, a public sale is necessary in order to establish
actual market value of the property
Foreclosures on FHA-insured mortgages start with the filing of Form 2068, Notice of Default, which must be given to the local FHA administrative office within how many days of default?
The BEST method a lender can use for a guide to avoid poor property management by the homeowner/borrower is
pride of ownership
What is the borrower allowed to do during the entire redemption period?
retain possesion of the property
To recover the payments suspended during a moratorium, instead of charging higher payments, a lender may choose to offset any possible hardships for the borrower by
The answer is extending the term of the loan by a time interval equal to the moratorium period. Lenders typically do not forgive the payments, but want to eventually collect all of the funds due from the borrower.
Which of the following is the BEST indicator for the lender that the borrower has abandoned the property?
Mail returned and no forwarding address provided
If the lender and the borrower agree on a recasting arrangement to avoid foreclosure, the lender will require a
new title search
If the lender has petitioned the courts for right of possession to protect the collateral, the lender is also interested in the
The answer is disposition of the income generated by the property.
Under the terms of the insurance policies of most private mortgage insurance companies, a default is interpreted to be nonpayment for how many months?
Most lenders are not disturbed by payments made within the grace period, but they will take remedial action when an account consistently incurs late charges or when a borrower exceeds a delinquency period of how many days?
In the event of foreclosure on a conventional mortgage with private mortgage insurance, the mortgagee has to notify the insurer of default within how many days?
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