Chapter 1
1. What is the difference between real property and personal property?
Real property is for land and all things permanent while personal property is for
intangibles and all things moveable.
2. What is meant by an estate?
Everything that a person owns including both real and personal property.
3. How can a leased fee estate have a value that could be transferred to another party?
The value of estate under leased free estate is determined by market
4. What is an abstract of title?
An abstract of title is a historic summary all the records and documents linking
property and the owner.
5. Name the three general methods of title assurance and briefly describe each. Which
would you recommend to a friend purchasing a home? Why?
The three general methods of title assurance are “general warranty deed”,
“abstract and opinion method” and “title insurance”. In general warranty deed, the seller
assures the buyer that the property is free and clear of all easements and lease. Abstract
and opinion method uses lawyers’ opinion as a way of title assurance. And lastly title
insurance method combines the first two methods and the title insurance companies will
insure the title to a property. I would recommend a friend the title insurance method as it
does all the due diligence and it has added benefit of being insured for the property in
cause of unseen hazards.
6. Would it be legal for you to give a quitclaim deed for the Statue of Liberty to your friend?
Yes, it would be legal for me to give a quitclaim deed for the Statue of Liberty as
it simply conveys to the grantee whatever rights, interests and title that the grantor has in
the property.
Chapter 2
2. What does default mean? Does it occur only when borrowers fail to make schedule
payments?
The loan is in default when the borrow fail to perform one or more covenants
under terms of the note. Generally, failure to make payment is the main reason for default
but there are other reasons that can cause default such as failure in tax or premium of
insurance payment.
3. What is meant by mortgage foreclosure, and what alternatives are there to such
actions?
When the borrower cannot make payment for property, the court satisfy the
unpaid debt by selling the property. Generally the lender prefers to seek alternative to
actual foreclosure by restructuring of the mortgage loan, transfer to the mortgage to a
new owner, voluntary conveyance of the title to the mortgagee, a “friendly foreclosure”, a
prepackaged bankruptcy, and a “short sale” with the lender agreeing to sale price less
than the loan balance.
7. What does “assignment” mean and why would a lender want to assign a mortgage loan?
The “assignment” of a mortgage loan is when the lender transfers the ownership
of note to a different party in order to mitigate risk of default by borrower.
17. What special advantages does a mortgagee have in bidding at the foreclosure sale where
the mortgagee is the foreclosing party? How much will the mortgagee normally bid at the
sale?
The mortgagee can pay for the purchase through the use of his/her own claim on the loan
and other fees. Normally the mortgage will bid the amount of the claim.
Chapter 2 Problems
1. Last year Jones obtained a mortgage loan for $100,000. He just inherited a large sum of
money and is contemplating prepaying the entire loan balance to save interest. What are
his rights to prepay the loan?
Unless it is stated in the term of his loan, prepaying the entire loan is not a right
and there could be prepayment penalties.
2. Mr. Smith acquired a property acquired a property consisting of one acre of land and a
two-story building five years ago for $100,000. He also obtained an $80,000 mortgage
loan from ACE Bank to provide financing to complete the purchase. This year, Mr.
Smith constructed another building on the property with his own funds at a cost of
$20,000. Mr. Smith has decided after completing the building to approach Duce Bank to
borrow and mortgage the new building with a $16,000 loan. Is Duce likely to provide the
$16,000 in financing? What other options may Mr. Smith have to consider?
Duce Bank is likely to provide Mr. Smith with $ 16,000 in financing considering
the fact that he has the means to finance it without taking a loan. If Duce bank
does not loan him the money, he can refinance the loan or work with banks on
how he might be able to finance the new building.
3. Ms. Brown purchased a property consisting of one acre of land and building for $100,000
five years ago. She obtained an $80,000 mortgage loan from ABC Bank at that time.
The building was very old, and Ms. Brown has just had it torn down. She now wants to
build a new building. Ms. Brown hopes to finance construction with ABC Bank and will
call them soon to discuss financing the new project. How will ABC Bank evaluate the
possibility of making another loan to Ms. Brown?
Tearing down building without prior agreement of Bank violate the mortgage
agreement of the borrower needing to preserve the property. The bank will more
likely evaluate Ms. Brown as a high-risk lender and unlikely to provide new loan.
