Finance
A Florida property is encumbered by a first mortgage of $200,000 and a second mortgage of $50,000. If the property sells at foreclosure for $220,000, how much does the second mortgage holder receive?
A$0
B$20,000✓ Correct
C$50,000
D$70,000
Explanation
In foreclosure, lien priorities determine payment order. The first mortgage of $200,000 is paid first.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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 of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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