FINAL EXAMINATION
REAL ESTATE FINANCE
PROFESSOR BERNHARDT
FALL 2005
1.
You
have three (3) hours to complete both parts of this exam. You may allocate your time as you wish.
2.
This
is an open book exam. You may use
any written materials you wish.
3.
There are two parts to this exam:
PART ONE consists of 57 true/false questions and
constitutes 67% of your grade.
You should try to complete this part in two hours. Correct multiple-choice answers are to be
marked on the ParSCORE answer sheet form provided using pen or pencil and
following the instructions on that form.
If you change your answer, place an “X” through the wrong answer
and mark the correct answer. A machine
will score the exam and any ambiguities will be counted as a wrong answer.
PART TWO consists of one essay question and is
worth 33% of your grade. More
detailed instructions are located on the page containing the question. Write your responses in the blue books
provided. Write clearly and legibly. Write on every other line and every other
page to permit instructor comments. If
you are using exam software and typing your answers, be sure to frequently save
to the diskette.
Please
note:
We have tried not to use words and phrases in a technical, narrow sense. Thus, “deed of trust” and “mortgage” are used
interchangeably, except where the question itself shows that the distinction is
intentional. The same is true for
“foreclosure sale” and “trustee sale,” etc.
You may exercise the same latitude in your answers. You may also abbreviate wherever it is
appropriate (e.g., TD or DT for deed of trust, first letters for characters'
names).
4.
Write
your exam number on your exam envelope.
Put your correct class section and student exam number at the top of
this page, each page of questions, each blue book, and the ParSCORE test
form. Do not use your name, student
ID number or Social Security Number on any exam materials.
5.
At
the conclusion of the exam, return all exam materials to the exam envelope and
submit it to the proctor. Do not seal
the envelope. Failure to return
this exam with all its pages intact will result in a failing grade.
1.
This
part constitutes 33% of the exam.
There is one essay question in two parts.
2.
Read
the facts carefully. Answers based on
incorrect facts are incorrect answers.
3.
If
you think important facts are missing or badly stated, make explicit
assumptions about them. Do not make
assumptions that are unreasonable or that make the entire issue vanish.
4.
Read
the call of each question carefully; don't answer questions that haven't been
asked.
5.
You
should try to organize your thinking beforehand, so that relevant points are
put in the right places.
6.
Type
or answer in blue books. You may
abbreviate where appropriate. Write
legibly on every other line and one side of each page only. Illegible answers are not read.
Dora
purchased a lot from Jerry and gave him a note and deed of trust for $50,000 as
part of the price. Six months later,
Dora informed Jerry that she was planning on building a house on the lot and
had arranged to borrow $300,000 for its construction, but that her lender,
RichBank, required that its deed of trust be first in priority. Jerry agreed to and did execute a
subordination agreement, letting RichBank have priority over him. The agreement also provided that, as
consideration for subordinating, Dora waived CCP 580b regarding Jerry’s
mortgage.
A
few months later, Dora defaulted on her loan to Jerry, and when he contacted
her to find out why she was not paying him, she told him that she had defaulted
on both of her loans because she had lost her job, but that she expected to
inherit some money from her recently deceased aunt within the next six
months. Jerry agreed to make RichBank
current and to add what he advanced to his second mortgage so long as she paid
him within a year. To do this, they
opened an escrow and Dora deposited a grant deed made out to Jerry with
instructions for the escrow agent to record it if she had not repaid Jerry for
his advances by the end of the year.
Jerry
then contacted RichBank to find out how much was owed, but its loan officer
refused to speak with him on the ground that he was not the trustor and had not
recorded any Request for Notice of Default.
As a result, Jerry could not find out how much RichBank required for
reinstatement. Jerry contacted Dora who
told him that RichBank had noticed a sale for the following week.
Jerry
went to RichBank’s sale and offered to pay the auctioneer however much money
was necessary to cure all defaults (he had brought enough money with him to do
that) but he was told that only payment of the entire loan would be
accepted. Although Jerry offered to go
to his bank to borrow enough money to do so, the auctioneer refused to delay
the sale more than ten minutes, which was not enough time for Jerry to
accomplish that. So Jerry stayed at the
sale, yelling at the top of his voice to all bidders that the sale was not
proper.
Notwithstanding
all of this commotion, the property was sold to Thorp for $300,001, which was
$1 over RichBank’s bid. Jerry tried to
stop the auctioneer from delivering the trustee’s deed to Thorp, but could not.
1.
That
was yesterday. Today Dora has come to
see you. She wants to know what remedies
she has against RichBank and Thorp, and whether or not she should file
bankruptcy. Advise her.
2.
Jerry
has also come to see you. He wants to
know what remedies he has against RichBank, Thorp, and Dora. Advise him.
Notwithstanding any conflict of interest you perceive in talking to him
as well as to Dora, advise him. Your
answer here may refer to parts of your previous answer without repeating those
same points in full a second time.
END OF EXAM