California Real Estate Practice Exam

The best description of a holder in due course is?

1. A mortgage broker

2. A real estate agent

3. A note purchaser

4. A loan servicer

The correct answer is: A note purchaser

A holder in due course is someone who has taken possession of a negotiable instrument for value, in good faith, and without notice of any defects or issues. In comparison, a mortgage broker (A) typically arranges loans between borrowers and lenders, but does not hold the note itself. A real estate agent (B) assists buyers and sellers in the process of buying and selling property and is not typically involved in the note itself. A loan servicer (D) is responsible for collecting payments on a loan, but does not hold the note itself. Only a note purchaser (C) meets the criteria for a holder in due course.