A developer building a new subdivision would most likely obtain which type of mortgage to cover multiple parcels?

A developer building a new subdivision would most likely obtain which type of mortgage to cover multiple parcels?

• A. Wraparound mortgage
• B. Blanket mortgage
• C. Purchase-money mortgage
• D. Open-end mortgage

Answer: (B)

For financing a subdivision, the right approach is a blanket mortgage because it ties several parcels into one loan and includes a release clause. This lets the developer obtain financing to cover multiple parcels at once, while still allowing individual parcels to be released from the loan as they are sold. The lender’s lien remains on the remaining lots, providing built-in collateral for the ongoing project. Other options don’t fit as well. A wraparound mortgage wraps around an existing loan rather than bundling multiple parcels under one lien and isn’t designed to manage a portfolio of lots. A purchase-money mortgage is seller financing for a single property, not a subdivision. An open-end mortgage allows additional borrowing on a single loan but doesn’t automatically secure multiple parcels with a release mechanism, making it less suitable for a project consisting of many lots.

For financing a subdivision, the right approach is a blanket mortgage because it ties several parcels into one loan and includes a release clause. This lets the developer obtain financing to cover multiple parcels at once, while still allowing individual parcels to be released from the loan as they are sold. The lender’s lien remains on the remaining lots, providing built-in collateral for the ongoing project.

Other options don’t fit as well. A wraparound mortgage wraps around an existing loan rather than bundling multiple parcels under one lien and isn’t designed to manage a portfolio of lots. A purchase-money mortgage is seller financing for a single property, not a subdivision. An open-end mortgage allows additional borrowing on a single loan but doesn’t automatically secure multiple parcels with a release mechanism, making it less suitable for a project consisting of many lots.