1 (a) . In times of crisis, a contractual clause that is highly relevant is one that causes the early maturity of the debt, which is usually guaranteed by a mortgage, which, in short, can translate into an execution, also, anticipated of the latter. This early termination clause, which can also be called "acceleration clause". Currently, there are a number of laws and regulations of the states that govern the foreclosure process to protect both the creditor and the mortgagor against injustice. (Rhodes, 2008).
The first form of foreclosure is by judicial auction. This type is available in all states and is the required method in many of them. In this form, the court supervise the sale of property. In addition, the profits are intended, first, to cover the mortgage, then to pay other creditors of the right of retention and, finally, the mortgagor. All parties must be informed of the foreclosure, and it involves both judicial writings and some kind of judicial resolution, in general, after a short trial.
Pennsylvania follows judicial foreclosure. In Pennsylvania, there are different laws and clauses that have been formed to facilitate judicial action (Loftsgordon, 2017). For example, 42 Pa. Cons. Stat. Ann. §§ 8103, 5522(b)(2) allows foreclosing party may obtain a deficiency judgment. The right to reinstate mortgage is also provided by 41 Pa. Stat. Ann. § 404 (Loftsgordon, 2017). There are also special protections under 51 Pa. C.S.A. § 4105, which is supported by Servicemembers Civil Relief Act (Loftsgordon, 2017). Pennsylvania Rule of Civil Procedure 3129.2, on the other hand, guides on notice of sale. Other key citations include Pennsylvania Statutes Annotated Title 35, §§ 1680.402c to 1680.409c; Pennsylvania Statutes Annotated Title 41, §§ 403 to 404, and Pennsylvania Rules of Civil Procedure, Rules 1141-1150 (Loftsgordon, 2017).
1 (b) From perspective of a lender, the foreclosure procedures are not clear. For example, in some cases, the mortgagee has no choice but to wait for the foreclosure once all payments are due or persuade a court to split parts of the assets and sell them in order to pay the fee payable. This happen when acceleration clause is not supported by law
2. The market mechanism for real estate does not work because they tend to ignore the macroeconomics. throughout history, the boom-bust cycles of the real estate sector have often been very damaging to both financial stability and the real economy. Many of the main episodes of bank tension have been linked to cycles of boom and fall in real estate prices. The IMF studies reveal that, of the almost 50 systemic banking crises registered in recent decades, more than two thirds were preceded by boom and bust patterns in housing prices.
3. Net operating income (NOI) represents the best collateral for loan repayment. Rental income is not the best index for determining risk because it is still subjected to some adjustment. From the formula DSCR = NOI/DS, it means that the higher the NOI, the better the DSCR.
4 (a). The apartment falls under recovery phase and is in the office sub-urban area (Black Creek Group 2018). This is because the prompt shows that the place used to be residential but has potential of accommodating offices.
4 (b). The biggest concern would be the market condition (Joseph, 2007). If the apartment is to generate returns, then I will be worried whether the prevailing market condition will sustain such goal.
References:
Joseph, C. (2007). Credit risk analysis: A tryst with strategic prudence. New Delhi: Tata McGraw-Hill.
Chiquier, L., & Lea, M. J. (2009). Housing finance policy in emerging markets. Washington, DC: World Bank.Black Creek Group (2018). Cycle Monitor- Real Estate Market Cycles. Black Creek Research
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Rhodes, T. (2008). American foreclosure: Everything u need to know about preventing & buying. New York: McGraw-Hill.
Loftsgordon, A. (2017). Pennsylvania Home Foreclosure Laws. Retrieved from: https://www.alllaw.com/articles/nolo/foreclosure/laws-in-pennsylvania.html
