SIE Understanding Products and Their Risks Question 73: Answer and Explanation

Question: 73

Which of the following is correct regarding a Section 1031 Tenant in Common (TIC) mortgage?

• A. It will be a full-recourse mortgage for all participants who sign.
• B. Only participants with ten percent or more participation will sign.
• C. All participants sign the mortgage.
• D. The mortgage is a standard form, with no deviation for individual circumstances.

Correct Answer: C

Explanation:

C: Choice C is correct because all participants are borrowers and therefore the financial institution will have them all sign the mortgage. Choice A is incorrect because the participants would generally have risk limited to their investment in the transaction with no risk to their personal assets. Choice B is incorrect because all TIC participants sign the mortgage. Choice D is incorrect because no standard mortgage form is used, as a situation may have extenuating circumstances, whereby the lender may require recourse for such things as criminal activities by the borrowers.