### What is an alienation clause in a mortgage? - [x] A provision that requires the borrower to pay the loan balance upon the sale or transfer of the property - [ ] A clause that allows transfer of the mortgage debt to someone else without lender's approval - [ ] A clause that reduces interest rates after a certain period - [ ] A provision that restricts the borrower from refinancing the loan > **Explanation:** An alienation clause is a mortgage condition that mandates the borrower to repay the entire loan balance upon the sale or transfer of the property. This clause ensures that the property remains with the borrower while the mortgage is active and prevents the assignment of the mortgage debt without the lender's consent. ### Why are assumable mortgages rare in today's real estate market? - [x] Because almost every mortgage loan contains an alienation clause - [ ] Because borrowers prefer not to assume existing loans - [ ] Because lenders do not offer loans with interest rates comfortable to current property owners - [ ] Because property values have fallen dramatically > **Explanation:** Assumable mortgages are rare today because most mortgage loans include an alienation clause, which requires full repayment of the loan balance if the property is sold or transferred. This prevents the borrower from transferring the mortgage debt without lender approval. ### What does an alienation clause prevent? - [ ] The lender from charging late payment fees - [ ] The borrower from selling the property - [x] The borrower from assigning the mortgage debt to another person without lender’s approval - [ ] The borrower from refinancing the loan > **Explanation:** An alienation clause prevents the borrower from assigning the mortgage debt to someone else without the lender's approval. It ensures the original borrower remains responsible for the loan until it is fully paid off. ### When does the borrower need to pay the balance of the loan in the presence of an alienation clause? - [ ] When property taxes increase - [ ] When the interest rate decreases - [x] Upon the sale or transfer of the property - [ ] When property insurance lapses > **Explanation:** In the presence of an alienation clause, the borrower must pay the balance of the loan upon the sale or transfer of the property. This clause is designed to protect the lender by ensuring that the property remains as collateral with the borrower who originally took out the mortgage. ### What is the primary purpose of an alienation clause? - [x] To ensure that the borrower pays off the mortgage when the property is sold or transferred - [ ] To allow easy assignment of mortgage debt to a new buyer - [ ] To reduce mortgage interest rates over time - [ ] To prevent the borrower from refinancing the mortgage > **Explanation:** The primary purpose of an alienation clause is to ensure that the borrower pays off the mortgage in full when the property is sold or transferred. This clause protects the lender's interest by maintaining control over who holds the mortgage debt. ### Who benefits most from the inclusion of an alienation clause in a mortgage? - [ ] The borrower - [x] The lender - [ ] The real estate agent - [ ] The property appraiser > **Explanation:** The lender benefits most from the inclusion of an alienation clause in a mortgage. This clause ensures that the lender can demand full repayment of the loan if the property is sold or transferred, thus maintaining control over the mortgage debt and the borrower responsible for it. ### What happens if a borrower wants to transfer their mortgage debt to another person but the loan has an alienation clause? - [ ] The borrower can transfer the debt without restrictions - [ ] The new party automatically takes over the existing loan under current terms - [x] The borrower needs lender approval to transfer the mortgage debt - [ ] The transfer is automatically declined, and the original borrower must continue payments > **Explanation:** If a borrower wants to transfer their mortgage debt to another person but the loan has an alienation clause, they need approval from the lender to do so. The alienation clause prevents the transfer without the lender's consent. ### Why must the property remain under the borrower’s name while the mortgage is active in the presence of an alienation clause? - [ ] To increase the property's value - [ ] Ideally, to maintain a low-interest rate - [x] Because the property serves as collateral for the loan - [ ] To help in assessing higher property taxes > **Explanation:** In the presence of an alienation clause, the property must remain under the borrower’s name while the mortgage is active because the property serves as collateral for the loan. This ensures that the original borrower is responsible for the repayment. ### Can a borrower request an assumable mortgage in the presence of an alienation clause? - [ ] No, it is strictly not allowed under any circumstances - [x] Yes, but it is unlikely that the lender will agree - [ ] Only when property market values are high - [ ] Only after making several payments > **Explanation:** Borrowers can request an assumable mortgage even in the presence of an alienation clause, but it is unlikely that the lender will agree. Lenders prefer to retain control over the mortgage and ensure the original borrower remains liable for repayment. ### How does an alienation clause affect the ability to sell a property? - [ ] It makes the process much easier by simplifying the loan requirements - [x] It requires the borrower to pay off the mortgage upon selling the property - [ ] It has no impact whatsoever on the sales process - [ ] It significantly lowers the property value for potential buyers > **Explanation:** An alienation clause affects the ability to sell a property by requiring the borrower to pay off the mortgage upon selling the property. This ensures the lender receives full payment and the mortgage isn't transferred without their approval.