New Jersey Real Estate Exam Practice Question
A lender whose mortgagor has defaulted may be offered a deed in lieu of foreclosure. If accepted, which of the following will be true?
Correct Answer: B
Rationale: When a lender accepts a deed in lieu of foreclosure, they take ownership of the property, which typically occurs subject to any existing junior liens. This means that any secondary mortgages or liens remain attached to the property, and the lender assumes these responsibilities.
Option A is incorrect; a deed in lieu of foreclosure is still a negative mark on the borrower's credit report, despite being voluntary.
Option C is misleading; while lenders may have rights under certain insurance policies, these rights are not guaranteed with a deed in lieu.
Option D is also wrong, as the loan generally cannot be assumed after a deed in lieu, as it effectively ends the borrower’s obligations.
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