FinanceIntermediateCalifornia Exam

In California, a lender who forecloses on a purchase money deed of trust on a 1-4 unit residential property occupied by the borrower is generally:

AEntitled to pursue a deficiency judgment for the full loan balance

BBarred from obtaining a deficiency judgmentCorrect

CRequired to obtain a court order before any deficiency

DEntitled to deficiency if the property sold at a loss

Why Barred from obtaining a deficiency judgment Is Correct

Answer B: Barred from obtaining a deficiency judgment

California's anti-deficiency statutes (Code of Civil Procedure §580b) bar lenders from obtaining a deficiency judgment after foreclosing on a purchase money loan secured by owner-occupied 1-4 unit residential property.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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Key Terms to Know

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Loan-to-Value Ratio (LTV)

The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.