A homeowner with a mortgage sells his home to a purchaser who agrees to assume the mortgage. The purchaser applies for and obtains the lender's approval, and the seller is released from liability for the mortgage. This is an example of:
A. assignment
B. subrogation
C. subordination
D. novation
Answer: D. novation
This is a novation, because the lender has approved the purchaser and released the seller from liability. The purchaser has entered into a new loan agreement with the lender that replaces the original agreement between the seller and the lender.
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