All Mortgage Principal Paid Before Interest
This trap appears as a wrong-answer choice in 1 active question. Spotting how it is built is the repair: read each example's “why it's attractive” before the “why it's wrong.”
Subject distribution
- Real Property1
Example wrong choices
18902_mustard-seed-foreclosure-waterfall · REAL_PROPERTY · Choice A$18,000 to attorney's fees and foreclosure expenses, $7,000 to accrued interest, $180,000 to Galilee Bank's first mortgage, $21,000 to Bethany Credit Union's second mortgage, and $14,000 to Antioch Fund's third mortgage.
Why it's attractive
The choice divides the remaining junior-lien money instead of paying the second mortgage first.
Why it's wrong
The choice divides the remaining junior-lien money instead of paying the second mortgage first.
18902_mustard-seed-foreclosure-waterfall · REAL_PROPERTY · Choice B$18,000 to attorney's fees and foreclosure expenses, $180,000 to Galilee Bank's first mortgage, $35,000 to Bethany Credit Union's second mortgage, $7,000 to Antioch Fund's third mortgage, and nothing to the accrued interest.
Why it's attractive
The choice leaves accrued interest unpaid while paying a junior lien.
Why it's wrong
The choice leaves accrued interest unpaid while paying a junior lien.
18902_mustard-seed-foreclosure-waterfall · REAL_PROPERTY · Choice D$18,000 to attorney's fees and foreclosure expenses, $7,000 to accrued interest, $166,000 to Galilee Bank's first mortgage, $35,000 to Bethany Credit Union's second mortgage, and $14,000 to Antioch Fund's third mortgage.
Why it's attractive
The choice shorts the foreclosed first mortgage principal to pay both junior mortgages.
Why it's wrong
The choice shorts the foreclosed first mortgage principal to pay both junior mortgages.
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