Humber/Ontario Real Estate Course 3 Exam Practice

What document allows a mortgagor to release interest in a property under financial distress?

1. Foreclosure Deed

2. Mortgage Agreement

3. Power of Sale Notice

4. Quit Claim Deed

5. Agreement of Release

6. Deed in Lieu of Foreclosure

The correct answer is: Quit Claim Deed

The document that enables a mortgagor to relinquish their interest in a property when facing financial hardship is known as a Deed in Lieu of Foreclosure. This legal instrument allows a homeowner who is unable to continue making mortgage payments to transfer property ownership back to the lender voluntarily, thus avoiding the lengthy and often costly foreclosure process. By using a Deed in Lieu of Foreclosure, the mortgagor provides a means to settle their mortgage obligations while potentially mitigating damage to their credit score compared to a formal foreclosure action. This option is often seen as a mutually beneficial arrangement that can help lenders recover the property more amicably and efficiently while allowing the borrower to escape the burden of debt associated with the property. In contrast, other options, such as a Quit Claim Deed, typically involve the transfer of interest in property but do not specifically address the release of obligations tied to distressed financial situations. Other choices such as the Foreclosure Deed or Mortgage Agreement are not direct mechanisms for the mortgagor to release interest in the property under financial duress but rather pertain to the processes and agreements associated with securing a mortgage or the aftermath of a foreclosure. Thus, the Deed in Lieu of Foreclosure stands out as the