In California, a buyer assumes an existing deed of trust with the lender's consent and signs an assumption agreement. If the buyer later defaults, what is the original trustor's liability?
Correct Answer
B) The original trustor's liability depends on whether the lender issued a formal release of the original note
When a buyer assumes a loan with lender consent, the original borrower's liability depends on whether the lender issued a formal release (novation). If the lender only consented to the assumption without releasing the original borrower, the original trustor may still be liable as a guarantor.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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