Q&A Hero

Q: Rae's mortgage payment check is received a day late by Big Bank. Big Bank refuses the check and accelerates the mortgage debt. Rae is unable to pay this demand and Big Bank brings action to foreclose the mortgage. Discuss what defenses, if any, Rae has to the foreclosure action.

Q: Brianna is purchasing an apartment building from Austin that already has a $500,000 mortgage on it. Brianna is uncertain if she can make money on this purchase and certainly does not want the responsibility of paying the mortgage. Discuss how Brianna might structure this purchase to avoid responsibility for the preexisting mortgage.

Q: Daly and Leva entered into an agreement whereby Leva borrowed $15,000 from Daly, and Daly took a security interest in Leva's next corn harvest. The financing statement identified Daly and Leva by name and included their mailing addresses. Leva signed the statement. Can the security interest, in this case, be perfected by the financing statement filed?

Q: Attachment occurs when the: A. secured party does not sign a security agreement. B. debtor has no ownership rights in the collateral. C. secured party transfers something of value to the debtor. D. secured party gives possession of the collateral.

Q: Security interests on fixtures are perfected by: A. filing a financing statement with the registry of deeds where the land is located. B. making a note of the lien on the certificate of title issued by the state government. C. attachment alone. D. possession of the collateral.

Q: Which of the following is true of the UCC provisions which resolve priorities and claims of secured and unsecured parties? A. An attached security interest in inventory has priority over a conflicting security interest in the same inventory. B. Buyers of consumer goods are affected by perfected security interests of which they have no knowledge. C. Security interests in the seller's inventory prevail over buyers of goods in the ordinary course of business (except farm products). D. Conflicting security interests rank according to priority in time of filing or perfection.

Q: Morey purchased a house for $150,000, paying $15,000 in cash and giving a mortgage to a bank for the balance. When Morey defaulted on the loan, the bank foreclosed and sold the house for $25,000 less than Morey owed. Morey believed he no longer owed the bank any money. Discuss the case.

Q: Holly bought a house for $200,000. She put down $40,000 in cash, and took out a $160,000 loan from the Midland Bank to cover the rest of the cost. However, Holly found that she could not make her mortgage payments. Midland Bank foreclosed the mortgage, sold the house for $150,000, and told Holly that she was liable for the $10,000 difference between what she paid for it and what the bank sold it for. Did Midland act within its rights? Explain.

Q: A written agreement which identifies the goods and is signed by the debtor is called a: A. subordination agreement. B. security agreement. C. consumer loan agreement. D. registration rights agreement.

Q: A provision in the security agreement that the security interest of the creditor also applies to goods the debtor acquires at a later time is known as a(n): A. forbearance. B. attachment. C. floating lien. D. acceleration.

Q: A _____ is that which deliberately misstates the qualifications of a borrower to push a loan through the approval process. A. NINJA loan B. liar loan C. subprime loan D. home equity loan

Q: The _____ was established by the Department of the Treasury to support the efforts of homeowners who, though in default, wished to continue to make payments on their mortgages. A. Consumer Protection Act B. Dodd-Frank Act C. Troubled Asset Relief Program D. Home Affordable Modification Program

Q: A security interest is said to be perfected: A. when the secured party has done everything that the law requires to give the secured party greater rights to the goods than others have. B. when the secured party has a legally enforceable right to take that property and sell it to satisfy the debt. C. when the buyer takes the property subject to a mortgage and the seller agrees to continue paying the debt. D. when the goods are sold but regained as soon as the debtor takes possession of the new property.

Q: In which type of mortgage is the loan repaid when the borrower dies or the property is sold? A. Variable-Rate Mortgage B. Conventional Mortgage C. Balloon-Payment Mortgage D. Reverse Mortgage

Q: Under a ____, the mortgagor conveys his or her interest in the property to a disinterested third party, known as a trustee. A. security agreement B. mortgage C. deed of trust D. subordination agreement

Q: Which of the following is true of recording a mortgage? A. A failure to record the first mortgage would remove the obligation of the mortgagor to the first mortgagee. B. The second mortgagee must know about the first mortgage and is exempted to record the mortgage. C. If the mortgage is not recorded and a later mortgage is given on the same property, the old mortgage is superior to the second. D. Recording a mortgage notifies any third party that the mortgagee has an interest in the real property covered by the mortgage.

Q: Which of the following is true of equity of redemption? A. It is the right to pay off the mortgage in full, including interest, and thus discharge the debt in total. B. It states that a default on one installment payment will make the entire balance due immediately, giving the mortgagee the right to collect the full amount. C. It is the mortgagee's right to apply to a court to have the property sold. D. It is the right to receive each installment payment as it falls due.

Q: If the mortgagor has defaulted or has failed to perform some other agreement in the mortgage, the mortgagee has the right to apply to a court to have the property sold. This right is called ____. A. acceleration B. foreclosure C. perfection D. attachment

Q: An acceleration of the debt: A. increases the interest rate. B. makes the entire amount of the debt due for immediate payment. C. increases the monthly payment amount. D. makes the repayment period of the entire debt one year.

Q: If a bunch of mortgages are bundled together and sold as bonds like pension funds, the process is known as ___. A. redemption B. foreclosure C. acceleration D. securitization

Q: After repossessing the goods, the secured party (the creditor) may sell them at a public auction or private sale.

Q: A(n) _____ is a transfer of an interest in property for the purpose of creating a security for a debt. A. mortgage B. secured loan C. security interest D. unsecured loan

Q: A point is a one-time charge equal to: A. one-tenth of the principal amount borrowed. B. three percent of the principal amount borrowed. C. one percent of the principal amount borrowed. D. ten percent of the principal amount borrowed.

Q: Which of the following is true of conventional fixed-rate mortgage? A. It has a rate of interest that changes according to fluctuations in the index to which it is tied. B. It involves no government backing by either insurance or guarantee. C. It has a fixed interest rate during the life of the mortgage, where the monthly payments by mortgagor increase over the term of the loan. D. It has comparatively low fixed payments during the life of the mortgage, followed by one large final payment.

Q: Charles sold a house to Darla with Charles holding a recorded mortgage. Darla wants to sell the house and her purchaser, Cindi, obtains a financing commitment from Small Bank, provided Small Bank is able to hold a first mortgage on the house. How will Small Bank obtain the first mortgage? A. By paying off Darla's mortgage. B. Small Bank mortgages take priority over private mortgages. C. Charles may give oral consent that Small Bank will have priority. D. By paying off Charles' mortgage.

Q: Iris is looking for a short-term mortgage that will allow her to pay fixed payments at a relatively low fixed interest rate during the life of the mortgage and one large payment at the end of the term. What kind of mortgage should Iris take? A. A balloon-payment mortgage B. A VA mortgage C. A conventional mortgage D. A graduated-payment mortgage

Q: A security agreement can either be oral or in writing.

Q: Daisy attempts to put up Harry's property for a loan without Harry's knowledge or consent. There may be attachment but not perfection.

Q: A furniture store that puts up its inventory as collateral for a loan will grant the lender a floating lien.

Q: Maria should examine the certificate of title of a car that she plans to purchase to see if any liens are on the title.

Q: A secured party who has possession of the collateral must take reasonable care of the property.

Q: If a mortgage is not recorded and a later mortgage is given on the same property, the new mortgage is superior to the first.

Q: The right to pay off the mortgage in full, including interest, and thus discharge the debt in total is called the equity of mortgage.

Q: Fred Farmer is entitled to a jury trial when Big Bank attempts foreclosure on his farm.

Q: The mortgagee has the unrestricted right to sell, assign, or transfer the mortgage to a third party.

Q: If Enrico purchases a house that is already mortgaged and takes the house subject to the mortgage, the seller of the house agrees to continue paying the debt.

Q: Furniture loans, home improvement loans, student loans, construction loans are examples of mortgage-backed securities.

Q: A security interest is perfected when the secured party has a legally enforceable right to take the property and sell it to satisfy the debt.

Q: By taking a graduated-payment mortgage, Jake will pay a fixed interest rate and make increased monthly payments over the term of the loan.

Q: A reverse mortgage is a type of loan that allows older home owners to convert some of the equity in their home into cash while retaining ownership of their home.

Q: A deed of trust is foreclosed by court action. FALSE The provisions of many deeds of trust allow the trustee to sell the property without going to court. For this reason, some legal authorities do not consider a deed of trust a true mortgage, because true mortgages require a foreclosure action for the sale of the property.

Q: When a borrower does not qualify for one of the regular mortgages just covered, he or she might ask for and receive a subprime loan.

Q: Only personal property can be used to secure a debt.

Q: Linda puts up her land as collateral for a loan from Small Bank. Linda is a mortgagee.

Q: A conventional fixed-rate mortgage involves no government backing by either insurance or guarantee.

Q: Juanita's grandfather loans valuable artwork to the Art Museum on the condition that the same will go to Juanita if the museum closes. She wants to purchase property insurance on the art work because she feels that it would be a great loss if any mishap occurs. Discuss the legal implications of this situation.

Q: Malone purchased a painting by Van Gogh and took out a $1 million insurance policy on it. He later sold the painting but continued to make payments on the policy. When the painting was destroyed by vandals, Malone tried to collect $1 million from the insurance company. Evaluate the situation.

Q: Logan's building has a replacement cost of $500,000 and his fire insurance policy has an 80% coinsurance clause. Logan has $200,000 of insurance on the building which is completely destroyed by fire. Discuss how much Logan will collect from the fire insurance policy.

Q: Melinda hits a hole in the road while driving down the highway. Her car's axle breaks resulting in $2,500 of damages. Discuss if Melinda has coverage under any form of auto insurance.

Q: Lane mails a $600 check for his $50,000 home policy with Surround Insurance Co., two months late. Surround cashes the check. Two weeks later, the house is destroyed by fire. When Lane attempts to collect the $50,000 in policy proceeds, Surround asserts that the policy had lapsed and offers to refund the $600 payment. Discuss the legal rights and obligations of Lane and Surround Insurance Co.

Q: In most states an innocent misrepresentation by the insured would make the policy: A. voidable by the insurer. B. voidable by the beneficiary. C. enforceable since there was no intentional misconduct. D. enforceable to a reasonable amount as determined by the court.

Q: While Leah and Grant were lawfully married, Leah had purchased a $500,000 life insurance policy on Grant's life, naming herself as the beneficiary. Subsequently they got divorced and Grant died a year later. Grant leaves two surviving children, Tom and Cindy. Who is likely to receive the proceeds of the $500,000 life insurance policy?

Q: Titan Insurance Co. pays the damages for Anna's car. The damages were a result of an accident caused by Earl, who was drunk while driving. Discuss Titan's legal rights in this situation.

Q: At 18, Jackson purchased a straight life insurance policy with a face value of $20,000. At a later time, he borrows a loan value against the cash surrender value of the policy. However, Jackson dies unexpectedly while the loan is still outstanding. Discuss the case.

Q: Grant, a construction worker, purchased a double indemnity option from his life insurance company. Several years later, Grant was seriously injured in a construction accident. Four months after the accident, Grant died as a result of the bodily injuries he sustained in that accident. When Grant's wife, the beneficiary, attempted to collect double the amount of the policy, the insurer informed her that she was only entitled to the original amount of coverage. Analyze the case.

Q: Taft takes out an insurance policy on his wife, Kathryn, when he learns that she is to be stationed in another country that is at war. She gets killed while on duty in the war zone. Can Taft collect on the life insurance policy? Explain.

Q: A(n) _____ will provide temporary insurance coverage until the policy is formally accepted. A. premium B. adhesion contract C. warranty D. binder

Q: Joe had made an agreement with Auto Insurance Co. not to use his van for commercial business purposes when he purchased auto insurance. Joe had an accident while delivering pizzas for Bigger Pizza Inc. For which type of violation will Joe not be covered under his insurance? A. Fraudulent concealment B. Misrepresentation C. Concealment D. Breach of warranty

Q: The insurance company's liability under comprehensive coverage is limited to the _____ of the vehicle at the time of the loss. A. actual cash value B. outstanding loan value C. replacement value D. stated value

Q: Peter lost control of his car and drove it though his neighbor Clyde's fence. If Clyde were to bring a claim against Peter for the damage to the fence, what type of insurance would Peter need to cover the damage? A. Homeowner's insurance B. Property damage liability insurance C. Collision insurance D. No-fault insurance

Q: An uninsured motorist drove though a red light and hit the passenger side of David's car. David, the driver, suffered a concussion, and the passenger, Jayne, broke her right arm and leg. David's car sustained extensive damages that would cost $2,000 to repair. If David has uninsured-motorist insurance, the coverage will: A. protect David, but not Jayne. B. protect David and Jayne and reimburse David for the $2,000 in damages to his car. C. protect David and Jayne but not cover any of the damages to David's car. D. cover any injuries sustained by the uninsured motorist, to prevent the motorist from suing David.

Q: Stanley falls in the low-income group. Which of the following health care plans can Stanley opt for? A. Medicaid B. Long-term care insurance C. Medicare D. Mediclaim

Q: A(n) _____ is an amount of any loss that is to be paid by the insured and can be a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. A. loan value B. deductible C. annuity D. cash surrender value

Q: Which of the following is true of coinsurance? A. It can be purchased to protect both real and personal property. B. It allows the insured to pay an extra premium initially in exchange for a guaranteed option to buy more insurance at certain specified times later. C. It excuses the insured from paying premiums if he or she becomes disabled. D. It is a provision under which the insurer and the insured share costs, after the deductible is met, according to a specific formula.

Q: A protection that insures property that cannot be covered by specific insurance because the property is constantly changing in either value or location is a(n): A. floater policy. B. collision insurance. C. annuity. D. coinsurance.

Q: Lucia had a homeowner's insurance policy on her house. While she was away on vacation, her porch got burned to the ground. After the fire, her house was burglarized and goods worth thousands of dollars were stolen from it. When Lucia arrived home, she called the police. While a police officer was interviewing her in her dining room, a chandelier fell on him and knocked him unconscious. Which losses will Lucia's homeowner's policy cover? A. The losses due to theft and the injuries sustained by the officer, but not the losses incurred by the fire. B. The losses due to fire and the injuries sustained by the officer, but not the losses incurred by theft. C. The losses incurred due to fire and theft but not the injuries suffered by the police officer while on her property. D. The losses incurred due to fire and theft as well as the injuries suffered by the police officer while on her property.

Q: _____ permits a driver to buy optional coverage such as personal injury insurance that would allow him or her to receive payment without bothering to determine fault. A. Comprehensive coverage B. Add-on coverage C. Threshold coverage D. Collision coverage

Q: Universal life insurance allows the policy owner to modify: A. face value of the policy and the premiums. B. face value of the policy but not the premiums. C. premiums but not the face value of the policy. D. face value of the policy and obtain refunds of premiums already paid.

Q: _____ offers protection alone, and is the least expensive kind of life insurance. A. Straight life insurance B. Universal life insurance C. Limited-payment life insurance D. Term insurance

Q: Bill has a $500,000 life insurance policy naming his minor children as beneficiaries. However, Bill and his business partner, Marcy, are convicted for fraudulent business transactions. Will Bill's children be able to collect the life insurance proceeds? A. No, policies often do not cover the insured when he/she violates the law. B. Yes, as it would not be against public policy for beneficiaries to receive insurance proceeds in such a case. C. Yes, but not entirely. They will be given an allowance for necessaries with the balance going to Marcy's heirs. D. No, all the proceeds will go to a state administrated crime victims' fund.

Q: If an insured purchases a guaranteed insurability provision on a life insurance policy: A. the insured is allowed to pay an extra initial premium in exchange for an assured option to buy more insurance at certain specified times later with no questions asked. B. the insurer is allowed to excuse the insured from paying premiums if the insured becomes disabled. C. the insured has to pay an extra $25 in exchange for a guarantee of coverage by the insurance should the insured become disabled. D. the insurer has to pay double the amount of the policy to the beneficiary if the insured dies from accidental causes.

Q: Kaycee obtains fire insurance on an empty warehouse. Later Kaycee manufactures and stores fireworks in the building. A lightning strike in a thunderstorm explodes the fireworks and destroys the building. The fire insurance policy is: A. valid since the building was empty when the policy was obtained. B. void since a material change in risk occurred. C. voidable if the lightning was not foreseeable. D. valid since there are negligible liabilities which applies to storing fireworks.

Q: Faith owes $50,000 to Investment Lenders Inc., a partnership of Cindy and Ryan. She is also a partner with Tom in a business venture. What insurable interests exist in this situation? A. Faith has an insurable interest in Cindy and Ryan's lives. B. Investment Lenders Inc. has an insurable interest in Tom, but does not have an insurable interest in Faith. C. Only Tom and Faith have insurable interests. D. Tom and Faith have insurable interests in each others' lives and Investment Lenders Inc. has an insurable interest in Faith.

Q: What type of insurance policy requires the payment of premiums throughout the life of the insured and pays the beneficiary the face value of the policy upon the insured's death? A. Limited-payment life insurance B. Universal life insurance C. Straight life insurance D. Term life insurance

Q: Sagan forgets to list in his health insurance application that he broke his arm at age five. He is not guilty of fraudulent concealment.

Q: When the insurance company gives up one of its rights to help the insured, the company has made a waiver.

Q: The _____ accepts the risk of loss in return for a premium. A. insured B. insurer C. beneficiary D. benefactor

Q: Coinsurance covers goods that are moved by land carriers such as rail, truck, and airplane.

Q: Property insurance can be made less expensive by the use of a deductible.

Q: David's house suffers $5,000 of water damage due to the fire department fighting a fire at his house. David may recover for this loss under his fire insurance policy.