A California buyer purchases property by taking title 'subject to' an existing deed of trust without assuming the loan. If the buyer later defaults and the lender's foreclosure sale does not fully satisfy the debt, who bears personal liability for any remaining deficiency?
Correct Answer
B) The original borrower, because they remain personally obligated on the promissory note
When a buyer takes title 'subject to' an existing deed of trust, they do not sign or assume the promissory note and therefore incur no personal liability for the debt. The original borrower (trustor) remains solely and personally obligated on the note. The buyer's only risk is losing the property through foreclosure; the original borrower retains exposure to a deficiency judgment if one is permitted under California's anti-deficiency statutes.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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