Question 21

The buyer assumes personal liability.

In a mortgage assumption, the buyer takes over the existing mortgage and assumes personal liability for the debt, which means they are responsible for making future payments on the loan.

A) The buyer assumes personal liability.

This statement is correct because when a buyer assumes a mortgage, they become personally liable for the mortgage debt, meaning they commit to repaying the loan under the original terms. This is a fundamental aspect of mortgage assumptions.

B) The seller may or may not be released from liability.

This option is misleading. In many cases, the seller remains liable unless explicitly released by the lender. Therefore, stating that the seller "may or may not be" released does not accurately reflect the typical outcomes of a mortgage assumption.

C) The buyer is required to sign a new mortgage note.

This statement is incorrect. In a mortgage assumption, the buyer does not necessarily sign a new mortgage note; instead, they take over the existing mortgage terms. A new note may be required in certain situations, but it is not a standard requirement of all assumptions.

D) The mortgage automatically releases the seller upon receipt of a warranty deed.

This statement is false. A warranty deed does not automatically release the seller from liability on the mortgage. Unless the lender agrees to release the seller, they may remain liable for the mortgage even after the property is transferred.

Conclusion

The correct answer, that the buyer assumes personal liability, accurately reflects the nature of mortgage assumptions where the buyer takes on responsibility for the mortgage. Other options incorrectly describe the implications of mortgage assumptions, particularly regarding the seller's liability and the requirement for a new mortgage note. Thus, option A stands out as the only accurate statement regarding mortgage assumptions.