Question 47

The seller may or may not be released from liability.

In the context of mortgage assumptions, it is true that the seller may retain liability for the mortgage unless explicitly released by the lender. This means that even after a buyer assumes the mortgage, the seller could still be held responsible for the debt.

A) The buyer is relieved of personal liability.

This statement is incorrect because, in a mortgage assumption, the buyer typically does assume the mortgage obligation and is responsible for the payments. The liability of the buyer depends on the terms of the assumption agreement and whether the lender agrees to release the seller.

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

This statement accurately reflects the nature of mortgage assumptions. The seller remains liable for the mortgage unless the lender provides a formal release of liability, which is not guaranteed in all cases.

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

This option is incorrect because in many mortgage assumptions, the buyer may not need to sign a new mortgage note; instead, they might simply agree to take over the existing mortgage obligations. The specifics can vary based on lender policies and the terms of the assumption.

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

This statement is misleading as the mortgagee does not automatically release the seller from liability upon receiving a warranty deed. A formal action is usually required by the lender to release the seller from any obligations related to the mortgage.

Conclusion

The correct answer, which states that the seller may or may not be released from liability, underscores the complexities involved in mortgage assumptions. All other options either misrepresent the responsibilities of the buyer or the seller, highlighting the importance of understanding the terms of mortgage agreements and the role of the lender in these transactions.