Difficulty: Easy

Average Score: 100%

Which is true about mortgage assumptions?

Rationale

The seller may or may not be released from liability.

In a mortgage assumption, whether the seller is released from liability depends on the specific terms of the mortgage agreement and the lender's policies. If the lender does not formally release the seller, they may still retain liability for the mortgage even after transferring the property to the buyer.

A (The buyer is relieved of personal liability.) YOUR ANSWER

This statement is inaccurate because a buyer assuming a mortgage often takes on the responsibility of the mortgage payments, thus maintaining personal liability unless explicitly stated otherwise in the assumption agreement. Buyers typically remain liable until the lender officially releases them from that obligation.

C (The buyer is required to sign a new mortgage note.) YOUR ANSWER

In most cases of mortgage assumption, the buyer is not required to sign a new mortgage note; rather, they can assume the existing mortgage terms. This means they agree to take over the payments without necessarily creating a new obligation, which can simplify the transaction.

D (The mortgagee automatically releases the seller upon receipt of a warranty deed.) YOUR ANSWER

This assertion is misleading because the mortgagee does not automatically release the seller just by receiving a warranty deed. The release of liability for the seller must be explicitly stated by the mortgagee, typically through a formal modification of the mortgage agreement.

Conclusion

Understanding mortgage assumptions requires recognition of the nuances in liability transfer. While the assumption allows the buyer to take over payments, the seller's release from liability is contingent upon lender approval and specific agreement terms. This complexity highlights the importance of reviewing mortgage documents carefully to ascertain the responsibilities of all parties involved in the transaction.

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