LAW AND PRACTICE 12
The assessed value is 35% of a property valued at $250,000. The mill rate is 40. What are the monthly taxes on the property? 3500 933.32 4721.28 291.66
291.66 $250,000 X .35 = $87,500 Assessed Value X .04 Mill Rate = $3500 / 12 = $291.66 monthly taxes
Which of the following best describes an installment land contract? A contract to buy land only A mortgage on land A means of conveying title immediately while the buyer pays for the property A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property
A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property An installment land contract can be very risky for the buyer but does allow the buyer to get into a property which they may not qualify for. Can be used to avoid the acceleration clause in a mortgage. More info on Installment Land Contracts: Installment Land Contracts AKA "Land Contracts" is a purchase agreement in which the owner retains legal title to a property while the buyer, usually a tenant, makes payments. ONCE THE BUYERS COMPLETES THESE PAYMENTS, THE SELLER DEEDS THE PROPERTY TO THE BUYER. Two big points here: 1) Since the buyer does not take legal ownership until they complete payments, this means the buyer, who usually has possession of the property, has no legal rights to the property beyond that of a renter. THEY DO NOT OWN IT - THE SELLER DOES. 2) Because of the number of creeps who have used installment land contracts to defraud unknowing buyers, the real estate commission does not have an approved form for us as agents to use. These contracts are not illegal, if you have clients who want to enter into such an agreement, they (notice the "they" here - I for one would not touch a land contract transaction for all the tea in China) need to bring in an attorney to draw up the necessary paperwork.
Which of the following documents accompanies the deed of trust? A deed An abstract of title A contract of sale A promissory note
A promissory note The promissory note is secured by a deed of trust or mortgage.
A clause in a mortgage that allows a lender to declare the loan balance due on default of the mortgage payment is: Habendum clause Escalator clause Acceleration clause Alienation clause
Acceleration clause Once a borrower falls behind on the loan payments the acceleration clause can be exercised by the lender to declare the total loan balance due, effectively accelerating the payment of the loan.
Common purpose(s) of a "buydown" of an interest rate would be to: To help a buyer to afford a more expensive home To help a buyer qualify for a home more easily To help the seller make their home more attractive to a prospective buyer All of the above
All of the above A "buydown" is paying money to a lender in exchange for a lower interest rate. It reduces the monthly payment for a homebuyer. The payment made to a lender is in the form of "discount points." One discount point is one percent of the loan amount, hence paying 2 discount points to a lender would be paying 2% of the loan amount for a negotiated reduction in the interest rate. As a marketing tool it is frequently used by builders and sellers to make properties more attractive to buyers.
Which of the following is (are) correct concerning the parties of a trust deed? The trustee has naked title The lender is named the beneficiary The trustor has legal title All of the above
All of the above Trustee oversees the provisions of the Trust Deed. The lender benefits from any action taken by the Trustee. The trustor is the borrower and has legal title in a lien theory state.
A mortgage broker usually offers which of the following services? Sells the mortgage-backed securities on the second market Brings borrower and lender together Provides easement for general use extending across the property Donuts for realtors, free credit reports, and lower interest rates
Brings borrower and lender together A mortgage broker usually brings buyers and lenders together, typically on a commercial transaction.
Colorado is a lien theory state. This means: seller is released from obligation by the lender liens recorded against a property are normally foreclosed through the courts Deed of Trusts are liens and do not give the lender title to the property all of the above
Deed of Trusts are liens and do not give the lender title to the property Lien Theory secures the loan between the the buyer and the lender. In a lien theory state the lender does not get title they just get a lien established by a Deed of Trust. All liens on a property must be cleared prior to sale, this means the lender knows they will get paid if the property is ever sold. The seller is paid and out of the picture, that we are a lien theory state has nothing to do with them. In a lien theory state the lien is enforced by the Public Trustee and not the courts.
A power of sale clause is found in which of the following financing instruments? Promissory note Notice of default Mortgage note Deed of trust
Deed of trust The power of sale clause, found in a trust deed, authorizes a trustee to sell the secured property at public auction in the event of default by the borrower (trustor).
Einstein bought a property from Plato. Einstein agreed to pay Plato $1615 per month for the next 15 years. Then the total balance will be due and legal title will change hands at that time. This is called a: Blanket mortgage Amortized mortgage Wrap around mortgage Land contract
Land contract If title does not pass until the property has been paid in full, then it is a land contract and the payments are going directly to the seller.
In Colorado, a property subject to general ad valorem taxes is assessed on the first day of January of the current year, and the lien against the property for the taxes attaches: On the same date - Jan 1st of the current year The following January 1st The following February 28th The following April 30th
On the same date - Jan 1st of the current year Since taxes are paid in arrears the lien attaches at that time and it does not have to be recorded.
Which of the following charges increases the lender's yield on a real estate loan: Appraisal Origination Fee Credit report Title Insurance
Origination Fee The others are paid to the ones providing the service.
Davis defaulted on his mortgage and the lender began foreclosure proceedings. At the foreclosure sale Davis's house was sold for $115,000 while the unpaid balance of the loan was $121,000. What can the lender do about the $6,000 difference? Sue for specific performance Sue for injunctive relief Sue for monetary damages Sue for a deficiency judgment
Sue for a deficiency judgment Suit can be brought for the deficiency from what was owed to what was received by the lender, it is a deficiency judgment.
Which of the following statements regarding a promissory note is (are) true? The note pledges specific property as a security for a debt The note provides evidence of the debt The note is a promise from the vendor to the vendee The note is a promise from the trustee to the trustor
The note provides evidence of the debt A promissory note provides evidence of a debt. A mortgage or deed of trust pledges property as collateral in conjunction with a promissory note.
A deed of trust in Colorado is foreclosed: A public auction by the county treasurer A public auction by the sheriff Through the Public Trustee by a special administrative procedure Through the courts like a mortgage
Through the Public Trustee by a special administrative procedure The Public Trustee initiates the foreclosure process.
Colorado is a lien theory state. In a lien theory state the: Trustor (borrower) holds title to the property during the term of the mortgage Mortgagor may foreclose only by court action Mortgagee takes title to the property during the term of the mortgage
Trustor (borrower) holds title to the property during the term of the mortgage Trustor (AKA buyer or borrower) has title to the property. The loan is secured by a lien created through a Trust Deed and held by the Public Trustee. As the lender benefits from this lien, the lender is referred to as the "beneficiary".
A prepayment penalty refers to: a borrower making his loan payments before they are due a penalty incurred when a loan is paid off before its payoff date a habendum clause none of the above
a penalty incurred when a loan is paid off before its payoff date In some conventional loans, a penalty for paying off the loan before its due date is assessed. In Colorado this will never be higher than 1 1/2 % of the loan amount.
A real estate contract or land contract is described as a method of financing often substituted for mortgage or trust deed financing. Consequently a land contract can be: the same as a mortgage a security device similar to a lease a lease with an option to buy
a security device
Regarding trust deeds and mortgages: a trust deed must be foreclosed without court intervention a mortgage is never foreclosed through court intervention a trust deed may be foreclosed without court intervention a mortgage may be foreclosed without court intervention
a trust deed may be foreclosed without court intervention By not having to go through the courts to foreclose, a trust deed provides a faster and less expensive foreclosure process. In Colorado, to avoid having to use the courts, the Public Trustee must be named trustee in the Deed of Trust.
A court order that authorizes and directs the proper officer of the court to sell the property of a defendant as required by the judgment or decree of the court is known as: a writ of attachment a writ of execution constructive eviction actual eviction
a writ of execution A writ of execution is a court order authorizing the sale of a property whose proceeds will be used to satisfy a creditor who has won a court judgement. Don't confuse this with writ of attachment, which is an action taken by a creditor in which the court simply retains custody of the property while a lawsuit is being decided.
An owner is in default on a mortgage payment. The lender could call the entire loan balance due if the loan contained a(n): due-on-sale clause "or more" clause defeasance clause acceleration clause
acceleration clause The acceleration clause allows the lender to call the entire loan balance due.
A clause in a deed or trust, mortgage or promissory note which permits the lender to call the outstanding balance due and payable should the property be sold by the borrower is a(n): acceleration clause balloon payment clause exculpatory clause alienation clause
alienation clause The alienation clause is closely associated in meaning with Due-On-Sale Clause and Acceleration Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the property owner transfers ownership, title or interest without the lender's consent. An Acceleration Clause is a contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.
In order to foreclose a mortgage, a mortgagee would: notify the trustee of default file an attachment in the amount of the debt notify the mortgagor of default, wait 90 days, and publish a notice of default in the local paper file a court action
file a court action Explanation Mortgages are foreclosed by suing the borrower for default in a court of law.
At time of closing, a lender is allowed to collect a loan origination fee that: does not exceed 1% does not exceed the usury rate has been agreed to by the buyer in the contract does not exceed 2%
has been agreed to by the buyer in the contract While many lenders charge a 1% loan origination fee, it is negotiated between the lender and the buyer and referenced in the contract.
A due on sale clause: is an alienation provision requiring that the loan be paid off immediately if the property is sold allows that the payment responsibilities can be assumed by a third party is contained in all FHA and VA loans is synonymous with an acceleration clause
is an alienation provision requiring that the loan be paid off immediately if the property is sold FHA and VA loans do not have a strict due on sale clause.
Money realized in excess of the indebtedness and the foreclosure belong to: the court the PMI, FHA, or VA, whichever insured the loan mortgagee mortgagor
mortgagor Explanation The Mortgagor is the owner of the property. The owner placed the voluntary lien on the property which the mortgage represents to secure a loan for the property. Money left over from the sale of the foreclosed property, after all obligations were settled, would have been returned to the Mortgagor (AKA foreclosed owners.) The IRS views a foreclosure sale as a normal sale of the property. The owners would need to consider the tax consequences of the sale as the excess money may be viewed by the IRS as a capital gain and thus subject to capital gain taxes. More information about foreclosures in Colorado: Foreclosures: Foreclosure is the act of selling, by legal proceedings, real property to satisfy the obligations of the landowner to a third party. It is the procedure whereby property pledged as security is sold to pay the debt in the event of default in payment. There are three main types of foreclosure in the State of Colorado: The Public Trustee System: The Public Trustee, by law, serves as the neutral, intermediate party between the lender and the borrower to assure that each party can exercise its legal rights in a foreclosure action. The Public Trustee is NOT an attorney and cannot provide legal advice to any parties involved in the foreclosure action. A foreclosure conducted by the Public Trustee's office is authorized by a deed of trust containing a power of sale (right to sell property at public auction in the event of default.) The procedure for conducting the foreclosure is set by statute and must be followed precisely. The deed of trust is an agreement between three parties: the Grantor (owner) the Public Trustee (who has the power of sale) and the Beneficiary (lender.) The Judicial Foreclosure: Foreclosure conducted through the Court system on a mortgage, deed of trust, or judgment. The procedure for conducting the foreclosure is under Rule 105 of the Colorado Rules of Civil Procedure. A mortgage is an agreement between two parties: the Mortgagor (owner) and the Mortgagee (lender.) The Tax Sale: The Tax Sale Sale of real property by the Treasurer for failure to pay real estate taxes. The procedure for conducting the sale is set by statue.
What does the lender receive after a foreclosure sale? proceeds of the sale up to the amount of the outstanding debt, plus court and collection costs uncollected loan balance only entire proceeds of sale including any excess over the debt the property, since it was the collateral for the loan
proceeds of the sale up to the amount of the outstanding debt, plus court and collection costs The lender receives the proceeds up to the outstanding debt plus costs.
The trustor in connection with a trust deed is the party who: lends the money receives the payments signs the note holds the deed of trust
signs the note The trustor is the borrower under a deed of trust.
Under a mortgage, the mortgagor is the party who: lends the money receives the payments on the note holds the mortgage signs the note and gives the mortgage
signs the note and gives the mortgage The borrower is the mortgagor; the lender is the mortgagee.
Ms. Nation, an eligible veteran, made an offer of $95,000 to purchase a condo she will finance with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of reasonable value (CRV) for $92,000 was issued for the property. In this case: the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000 the seller can finance a second mortgage for the remaining balance the veteran can purchase the property, provided she can get an additional loan for a $3,000 down payment the veteran can wrap the $3,000 into the financed loan costs
the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000 The seller would need to come down on the purchase price, the buyer can put the $3,000 down, or the veteran may withdraw from the transaction. Definition of Certificate of Reasonable Value (CRV) A document issued by the Department of Veterans Affairs as a prerequisite for a VA loan; it is based on an approved appraisal. It establishes the maximum value of the property for VA purposes and, as a result, the maximum size of the VA loan.
A recorded deed of trust is removed from the county records: by recording a new deed of trust when final payment is made by the trustor when the deed of reconveyance is recorded when ownership and encumbrance title work is ordered
when the deed of reconveyance is recorded The deed of reconveyance must be recorded before a trust deed is released as a lien. A deed or reconveyance is a document issued by a mortgage holder indicating that the borrower is released from the mortgage debt and transfers the property title from the lender, also called the beneficiary, to the borrower, also called the trustor.
An example of negative amortization is a loan: where the amount applied to interest declines each month that is only partially amortized where the payments are insufficient to cover the loan interest where monthly payments are "plus interest" rather than "including interest"
where the payments are insufficient to cover the loan interest Negative amortization occurs when the payments are insufficient to cover the interest on the loan.
