Difficulty: Medium

Average Score: 50%

Which of the following is true about mortgage assumptions

Rationale

The seller may or may not be released from liability.

In a mortgage assumption, the seller's liability depends on the terms of the agreement and the lender's policies. While the buyer assumes the mortgage, the seller can remain liable unless explicitly released by the lender, which can vary by situation.

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

In a mortgage assumption, the buyer does assume the mortgage payments but does not automatically relieve the seller of liability. The buyer may still be personally liable for the debt if the lender does not release the seller, meaning that the seller could still be pursued for payment if the buyer defaults.

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

When a mortgage is assumed, the buyer typically does not sign a new mortgage note; instead, they take over the existing mortgage terms. The original note remains in effect unless the lender requires a new agreement, which is not standard in all scenarios involving assumptions.

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

The mortgagee does not automatically release the seller from liability just because they receive a warranty deed. The release of liability must be explicitly granted by the lender, and receipt of a deed does not imply that the seller is no longer responsible for the mortgage.

Conclusion

In the context of mortgage assumptions, it is crucial to understand the dynamics of liability. The seller's liability is contingent upon the lender's decision, which may vary depending on the terms of the mortgage and the assumption agreement. This understanding is vital for both buyers and sellers to ensure they are aware of their financial responsibilities in the transaction.

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