A California borrower signs a promissory note and deed of trust to purchase a home. Two years later, the beneficiary (lender) sells the loan to another financial institution. What happens to the deed of trust and promissory note?
Correct Answer
A) The deed of trust follows the promissory note to the new holder, who becomes the new beneficiary
Under the principle that 'the security follows the debt,' when a promissory note is transferred, the deed of trust that secures it automatically transfers as well. The new note holder becomes the new beneficiary under the deed of trust without requiring a new recording or borrower consent.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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