RE 101 Ch. 9: Principles of Real Estate Financing - Quiz Qs
Which instrument would be requested of the beneficiary by a borrower who had paid off a portion of a blanket mortgage? A.Grant deed B.Partial reconveyance deed C.Quitclaim deed D.Release deed
A.Grant deed B.Partial reconveyance deed C.Quitclaim deed D.Release deed Once a borrower has paid off a certain portion of a blanket deed of trust, one or more of the properties that secure the loan may be released from the deed of trust. This would be accomplished with a partial reconveyance deed.
If there are several borrowers on a promissory note, which phrase would be used in order to commit all the borrowers to repayment of the entire loan amount? A.Jointly B.Individually and severally C.Individually and jointly D.Jointly and severally
A.Jointly B.Individually and severally C.Individually and jointly D.Jointly and severally The phrase "jointly and severally liable" indicates that each borrower will be individually liable for the entire debt.
A promissory note that doesn't obligate the payee any further is: A.a security instrument B.given with recourse C.given without recourse D.non-negotiable
A.a security instrument B.given with recourse C.given without recourse D.non-negotiable A promissory note may be endorsed to a particular person without recourse, which means that the matter of future payments is entirely between the maker and the third party purchaser. The original payee won't be liable to the holder in due course if the maker fails to make payments.
If a trustor facing default files bankruptcy: A.any action on a pending foreclosure is stayed B.foreclosure will occur automatically as part of the bankruptcy process C.foreclosure will always be prevented D.there will be no effect on a pending foreclosure
A.any action on a pending foreclosure is stayed B.foreclosure will occur automatically as part of the bankruptcy process C.foreclosure will always be prevented D.there will be no effect on a pending foreclosure Filing bankruptcy temporarily stays a foreclosure action, or any other action by a creditor to recover debts. Bankruptcy does not necessarily prevent foreclosure, though.
A hard money second deed of trust would be: A.carried back by the lender B.given as a cash loan to a borrower C.for a shorter term than the first deed of trust D.obtained only from the seller of the property
A.carried back by the lender B.given as a cash loan to a borrower C.for a shorter term than the first deed of trust D.obtained only from the seller of the property A hard money loan is a cash loan, as opposed to an extension of a credit by the property seller (sometimes called a soft money loan). The term "carried back" is used in connection with seller financing.
A person who purchases a promissory note for value and without knowledge of any defects is a/an: A.endorser in blank B.holder in due course C.special endorsee D.qualified endorsee
A.endorser in blank B.holder in due course C.special endorsee D.qualified endorsee A holder in due course is a third party who purchases a promissory note for value and without knowledge of defects, and therefore is entitled to payment even if there are defenses that the maker could have used against the original payee.
The Federal Reserve could create a tight money market by: A.lowering the discount rate B.raising the discount rate and buying bonds C.buying bonds D.raising the discount rate and selling bonds
A.lowering the discount rate B.raising the discount rate and buying bonds C.buying bonds D.raising the discount rate and selling bonds To create a tight money market, the Federal Reserve would take actions that reduce the amount of funds available to lend. Those actions might include increasing key interest rates (the discount rate and/or the federal funds rate), raising reserve requirements, and selling bonds.
If interest is calculated on accrued interest as well as on the principal balance, it is known as: A.simple interest B.compound interest C.accumulative interest D.imputed interest
A.simple interest B.compound interest C.accumulative interest D.imputed interest Compound interest is calculated on both the principal amount and the accrued interest. A savings account typically pays compound interest, for example.
The _______________ in a promissory note allows the lender to call the note if the borrower defaults.
Acceleration Clause
It is customary to pay a/an _______________ to a lender when a new purchaser becomes primarily liable to the lender for repayment of a loan.
Assumption Fee
The lien of a deed of trust is removed by means of a/an _______________.
Deed of Reconveyance
The _______________ is the interest rate a bank is charged when it borrows from the Fed.
Discount Rate
A loan made with an installment note requires a balloon payment at the end of the loan's term.
False An installment note is a note for an amortized loan. It calls for the gradual repayment of the principal over the loan term. If the loan is fully amortized, no balloon payment is necessary at the end of the term.
In a deed of trust loan transaction, the lender is called the trustor.
False The borrower is called the trustor (or grantor), the lender is the beneficiary, and the neutral third party is the trustee.
The United States Treasury is responsible for managing the federal government's finances, which is referred to as _______________.
Fiscal Policy
One of the Fed's most important functions is setting and implementing the government's
Monetary Policy
A straight note is the type of promissory note used for an interest-only loan (a term loan).
True A straight note is used for a loan that calls for interest-only payments throughout the loan term.
In a lien theory state, a mortgage or deed of trust does not transfer title, but only creates a lien.
True Under lien theory, the borrower retains full title while paying off the loan.
The term hypothecation refers to a loan transaction where the borrower is permitted to retain possession of the collateral property, but the lender holds title until the loan is paid off.
True Under these circumstances, the lender holds legal title, which is also called naked title. The borrower's rights are referred to as equitable rights or equitable title.
Which of the following is the best definition of a prepayment penalty? A.A fee paid by a trustor when he pays some of the debt in advance B.A fee paid by a trustor when he is late in paying his monthly payment C.A fee paid by a trustor to lock in an interest rate on a loan until closing D.A fee paid by a buyer in order to assume an existing loan
A.A fee paid by a trustor when he pays some of the debt in advance B.A fee paid by a trustor when he is late in paying his monthly payment C.A fee paid by a trustor to lock in an interest rate on a loan until closing D.A fee paid by a buyer in order to assume an existing loan A prepayment penalty is paid by a borrower (a trustor or mortgagor) who pays off all or part of his debt in advance, before payment is due, if the loan terms provide for such a penalty. California law places restrictions on prepayment penalties charged in connection with loans secured by owner-occupied residential property with up to four units.
Which of the following is the best definition of a mortgage loan? A.A loan collateralized with real property B.A loan secured by a promissory note C.A recorded instrument related to a transfer of real property D.An unsecured debt relating to real property
A.A loan collateralized with real property B.A loan secured by a promissory note C.A recorded instrument related to a transfer of real property D.An unsecured debt relating to real property With a mortgage loan, the lender accepts a security interest in real property as collateral for the loan.
Which of the following is the best definition of a purchase money mortgage? A.A loan taken on all or part of the purchase price of a property B.A loan taken on more than one parcel of property C.A loan that includes personal property as well as real property D.A new loan that incorporates an existing first loan
A.A loan taken on all or part of the purchase price of a property B.A loan taken on more than one parcel of property C.A loan that includes personal property as well as real property D.A new loan that incorporates an existing first loan In its most general sense, "purchase money mortgage" refers to a loan that is secured by the same property that the loan funds are being used to buy. This includes both seller financing and cash loans from conventional lenders.
Which of the following would not be considered to be a negotiable instrument? A.A promissory note B.A personal check C.A bank draft D.A mortgage
A.A promissory note B.A personal check C.A bank draft D.A mortgage A mortgage is a security instrument, not a negotiable instrument. A mortgage is typically used to secure a promissory note, which is a negotiable instrument.
Which of the following will decrease the available supply of funds for mortgage lending? A.A rise in savings by individuals B.A nationwide increase in personal income C.A decrease in demand for home mortgage loans D.A rise in the rates paid by government bonds
A.A rise in savings by individuals B.A nationwide increase in personal income C.A decrease in demand for home mortgage loans D.A rise in the rates paid by government bonds If there is an increase in the yields paid by investments (such as stocks or bonds) that can be seen as competition to placing money in savings (or investing directly in mortgage-backed securities), then more investment funds will be directed into those and less money will be available for mortgage lending. More savings and more savable income will result in an increase in funds available for mortgage lending. And a decrease in demand for mortgage loans will result in an increase in the supply of available funds.
The buyer of a property would like to continue the payments on an existing loan secured by a deed of trust. The real estate agent would need to make sure that the loan does not contain which clause? A.Acceleration clause B.Subordination clause C.Option clause D.Release clause
A.Acceleration clause B.Subordination clause C.Option clause D.Release clause A buyer can assume a loan without the lender's consent only if the loan documents do not include an alienation (due-on-sale) clause, since that provision would enable the lender to demand immediate payment in full when the property was sold. An alienation clause can be considered a type of acceleration clause. (An acceleration clause gives the lender the right to demand payment in full if the borrower defaults by failing to make the payments or by violating other terms of the loan agreement.)
During the process of foreclosure on a deed of trust, the trustor retains the right to cure the default and reinstate the loan. Who has the right of possession of the property during this period? A.Beneficiary B.Lender C.Trustee D.Trustor
A.Beneficiary B.Lender C.Trustee D.Trustor The trustor may stay in possession of the property during the reinstatement period. The trustor has no right of possession once the trustee's sale has occurred, though.
Which party to a deed of trust would benefit most from a subordination clause? A.Beneficiary B.Trustee C.Trustor D.None of the above
A.Beneficiary B.Trustee C.Trustor D.None of the above The trustor (borrower) would benefit most from inclusion of a subordination clause, since this would help the trustor obtain subsequent loans using the same property as security. Construction loans, for instance, often require first lien position, so a trustor who anticipates needing a construction loan later will probably want a subordination clause in a deed of trust financing the purchase of the land.
What document is used to hypothecate title to personal property, as opposed to real property? A.Bill of sale B.Chattel mortgage C.Security agreement D.Certificate of clearance
A.Bill of sale B.Chattel mortgage C.Security agreement D.Certificate of clearance A security agreement is the security instrument used when a loan is secured by personal property (for example, when a refrigerator is purchased on credit). A bill of sale is the instrument that actually transfers title to personal property. Chattel mortgages are not used in California (or most other states).
A prepayment penalty may be imposed in a real estate transaction. Who would pay the penalty? A.Buyer B.Seller C.Buyer assuming a loan D.Lender
A.Buyer B.Seller C.Buyer assuming a loan D.Lender A prepayment penalty would have to be paid by a seller who's paying off an existing loan, if the finance documents provided for such a penalty.
Which of the following agencies operates in the secondary market in order to increase the availability of mortgage credit? A.Federal Deposit Insurance Corporation B.Federal Home Loan Mortgage Corporation C.Federal Housing Administration D.Department of Fair Employment and Housing
A.Federal Deposit Insurance Corporation B.Federal Home Loan Mortgage Corporation C.Federal Housing Administration D.Department of Fair Employment and Housing The Federal Home Loan Mortgage Corporation (better known as "Freddie Mac") is one of the major secondary market entities. By purchasing existing loans from lenders, Freddie Mac makes more funds available for the lenders to loan to their customers.
Wong borrowed $150,000 to buy 10 lots with $20,000 down. He paid off $40,000 and got two lots released from the blanket lien. Which of the following is true? A.His equity in the remaining lots increased B.His equity in the remaining lots decreased C.His equity in the remaining lots was unaffected D.The two lots were released in accordance with the subordination clause
A.His equity in the remaining lots increased B.His equity in the remaining lots decreased C.His equity in the remaining lots was unaffected D.The two lots were released in accordance with the subordination clause Once two lots have been released, there is a smaller number of lots remaining and a larger amount of the loan repaid. This means that the equity--the difference between the loan amount and the value of the security property--has increased.
Which pair of loans is synonymous? A.Interim loan/takeout loan B.Takeout loan/standby loan C.Construction loan/interim loan D.Construction loan/progressive payment loan
A.Interim loan/takeout loan B.Takeout loan/standby loan C.Construction loan/interim loan D.Construction loan/progressive payment loan A construction loan is a temporary loan, so it's also known as an interim loan. A takeout loan is permanent financing obtained once construction is complete.
What is the function of a partial release clause in a mortgage? A.It releases an original borrower from primary liability when a loan is assigned B.It releases a purchaser who takes title subject to an existing loan from having to pay a deficiency judgment in the event of default C.It enables a subsequently recorded lien to take a superior lien position D.It allows removal of the lien from certain portions of property offered as security, once a specified act has been performed
A.It releases an original borrower from primary liability when a loan is assigned B.It releases a purchaser who takes title subject to an existing loan from having to pay a deficiency judgment in the event of default C.It enables a subsequently recorded lien to take a superior lien position D.It allows removal of the lien from certain portions of property offered as security, once a specified act has been performed Under a blanket mortgage, once a specified act has been performed (almost always the payment of a certain amount of money), some of the properties subject to the lien may be released from the lien. This is possible because of the partial release clause included in the mortgage.
Which party to a deed of trust would execute a deed of reconveyance? A.Mortgagor B.Beneficiary C.Trustee D.Trustor
A.Mortgagor B.Beneficiary C.Trustee D.Trustor When a deed of trust is paid off, the trustee will execute and record a deed of reconveyance, releasing the trustor's property from the beneficiary's security interest.
What would be characteristic of a market in transition from buyer's market to seller's market? A.Prices would rise as supply decreases and demand increases B.Prices would decrease as demand decreases and supply increases C.Land development and new construction would decrease because of lower demand D.Prices would not be affected, as they are primarily driven by interest rates
A.Prices would rise as supply decreases and demand increases B.Prices would decrease as demand decreases and supply increases C.Land development and new construction would decrease because of lower demand D.Prices would not be affected, as they are primarily driven by interest rates A seller's market is one that benefits sellers, in that prices are higher. Under the theory of supply and demand, higher prices are created by increased demand and diminished supply.
Of the following, which is not a source of demand for mortgage funds? A.Sales financing B.Construction C.Refinancing D.Federal National Mortgage Association
A.Sales financing B.Construction C.Refinancing D.Federal National Mortgage Association The Federal National Mortgage Association (FNMA, or "Fannie Mae") is a supply source for mortgage funds. Sales financing, refinancing, and construction all demand mortgage funds.
A beneficiary under a blanket loan may set up a release schedule that requires a proportionately larger amount of money for the first lots to be released. Why would this occur? A.The best and most valuable lots tend to sell first B.More money paid up front will increase the security for the remaining lots C.To compensate for loss of security as the number of lots decreases D.All of the above
A.The best and most valuable lots tend to sell first B.More money paid up front will increase the security for the remaining lots C.To compensate for loss of security as the number of lots decreases D.All of the above The disproportionately large amount of money required before the release of the first parcels in a blanket loan is partly because the best lots tend to sell first and partly because of the need for increased security as the number of remaining lots decreases.
A seller sold her house to a buyer who agreed to assume the existing loan. They proposed this to her lender, who approved the assumption. Which of the following statements is true with respect to the outstanding loan payments? A.The seller remains primarily liable and the buyer is secondarily liable B.The buyer is primarily liable and the seller is secondarily liable as a surety C.The seller is completely relieved of liability D.The buyer is completely relieved of liability
A.The seller remains primarily liable and the buyer is secondarily liable B.The buyer is primarily liable and the seller is secondarily liable as a surety C.The seller is completely relieved of liability D.The buyer is completely relieved of liability A buyer who assumes an existing loan becomes primarily liable for repayment of the loan. However, the seller will retain secondary liability in the event that the buyer defaults. (A lender who consents to an assumption is often willing to release the seller from liability, but the question does not say that the lender did that in this case.)
A broker negotiated a loan secured by a first deed of trust. If the beneficiary did not specifically instruct the broker when to record it, when is the broker obligated to record the deed of trust? A.When the buyer instructs the broker to record B.When the seller instructs the broker to record C.Before funds are disbursed D.Within 10 days of the disbursement of funds
A.When the buyer instructs the broker to record B.When the seller instructs the broker to record C.Before funds are disbursed D.Within 10 days of the disbursement of funds If there are no specific instructions from the beneficiary, the broker must record the deed of trust before any funds are disbursed. If the beneficiary gives specific written authorization, the broker may either record the deed of trust or deliver it to the beneficiary within 10 days of the disbursement of funds.
Contact with home buyers, taking loan applications, and underwriting are activities of: A.a primary mortgage lender B.a secondary mortgage lender C.the Department of Veterans Affairs D.the Federal Housing Administration
A.a primary mortgage lender B.a secondary mortgage lender C.the Department of Veterans Affairs D.the Federal Housing Administration Loans are originated in the primary market. They may subsequently be sold to other lenders (or other investors) on the secondary market, but when a buyer interacts with a lender, it's in the primary market.
The clause in a deed of trust which enables the lender to declare the entire unpaid sum due upon the borrower's default is the: A.acceleration clause B.alienation clause C.forfeiture clause D.subordination clause
A.acceleration clause B.alienation clause C.forfeiture clause D.subordination clause An acceleration clause allows the lender to demand full payment immediately if the borrower defaults on any part of the loan agreement.
The Averys' mortgage loan has a due-on-sale clause. If they sell the property, this provision could become a/an: A.acceleration clause B.defeasance clause C.prepayment clause D.subordination clause
A.acceleration clause B.defeasance clause C.prepayment clause D.subordination clause If a loan contains a due-on-sale clause (or alienation clause), that means that if the borrower sells the property before the loan is paid off, the lender will be able to accelerate the loan and demand payment of the entire loan balance.
A clause in a second deed of trust that permits the first deed of trust to be refinanced without sacrificing its lien position is a/an: A.acceleration clause B.lien waiver C.subordination clause D.alienation clause
A.acceleration clause B.lien waiver C.subordination clause D.alienation clause A subordination clause in an earlier loan enables a loan recorded subsequently to take priority over the earlier loan. Refinancing is a new loan that takes the place of an existing loan, so without the subordination clause the second deed of trust would have higher priority than a refinancing of the first deed of trust that occurs after the second loan is made.
A clause that states that the rights of a deed of trust's beneficiary are secondary to those of the beneficiary of a subsequent deed of trust is a/an: A.alienation clause B.release clause C.submortgage clause D.subordination clause
A.alienation clause B.release clause C.submortgage clause D.subordination clause A subordination clause in a deed of trust allows another deed of trust to have higher priority, even though that other deed of trust will be recorded later.
A developer who owns six unencumbered parcels of land gave a lender one deed of trust on all six properties. This would be known as a/an: A.all-inclusive deed of trust B.blanket deed of trust C.construction deed of trust D.subordinate deed of trust
A.all-inclusive deed of trust B.blanket deed of trust C.construction deed of trust D.subordinate deed of trust When a single loan is secured by several pieces of property, it's called a blanket loan.
If one property is inadequate security for a loan, but the borrower owns other property, the lender may offer a/an: A.all-inclusive deed of trust B.blanket mortgage C.compound mortgage D.package mortgage
A.all-inclusive deed of trust B.blanket mortgage C.compound mortgage D.package mortgage A blanket mortgage is a loan secured by more than one property. While blanket mortgages are commonly used by subdivision developers, an owner of multiple properties may use a blanket mortgage if one property would not provide adequate collateral for the desired loan.
An open-end provision in a mortgage would be beneficial to a borrower who wants to: A.allow a subsequent buyer to assume the loan B.prepay the loan C.secure the loan with multiple parcels of land D.borrow additional funds
A.allow a subsequent buyer to assume the loan B.prepay the loan C.secure the loan with multiple parcels of land D.borrow additional funds An open-end mortgage allows a borrower who has paid off a certain amount of the loan to re-borrow additional funds without having to apply for a new loan.
A deed of trust places the power of sale with the: A.beneficiary B.sheriff C.trustee D.trustor
A.beneficiary B.sheriff C.trustee D.trustor Under a deed of trust, the trustee holds the power of sale in the event of default. Foreclosure by a trustee is called nonjudicial foreclosure.
A deed of trust (trust deed) would be signed by the: A.beneficiary B.trustee C.trustor D.trustee and beneficiary
A.beneficiary B.trustee C.trustor D.trustee and beneficiary Only the trustor (the borrower) needs to sign the document, because she's the one who is pledging her property as collateral. Just as a grant deed only has to be signed by the grantor, a deed of trust only has to be signed by the trustor.
A negotiable note contained an acceleration clause. This would: A.cause the note to lose its negotiability B.be required for the note to be negotiable C.have no effect on the note's negotiability D.be of no benefit to the payee
A.cause the note to lose its negotiability B.be required for the note to be negotiable C.have no effect on the note's negotiability D.be of no benefit to the payee An acceleration clause does not affect a note's negotiability; it can still be sold to a third party. The acceleration clause is beneficial to the payee of the note, since it facilitates collection of the debt and may make the note more attractive to investors.
An indicator of the purchasing power of the U.S. dollar would be: A.consumer price indexes B.gold standards C.key interest rates D.Treasury bill rates
A.consumer price indexes B.gold standards C.key interest rates D.Treasury bill rates Consumer price indexes can be used to track how quickly prices are rising (or falling) over time. This can be used to examine how far a dollar will go, toward purchasing certain commodities, at a particular point in time.
When the number of currency units increases, prices rise without an increase in underlying wealth, and the value of the units decreases, it is referred to as: A.deflation B.depression C.inflation D.recession
A.deflation B.depression C.inflation D.recession If, for instance, too many dollars get pumped into circulation, that will drive prices up and diminish the purchasing power of each individual dollar (for example, it will suddenly cost $5 instead of $4 to buy a widget). That phenomenon is known as inflation.
A mortgagee is most likely to waive a prepayment penalty when: A.deflation is occurring and interest rates are dropping B.inflation is occurring and interest rates are rising C.the supply of money outstrips the demand D.new home construction is decreasing
A.deflation is occurring and interest rates are dropping B.inflation is occurring and interest rates are rising C.the supply of money outstrips the demand D.new home construction is decreasing If interest rates are rising, a mortgagee (a lender) may benefit from prepayment of its existing lower-rate, fixed-rate loans. It can take funds received from prepayment of these loans and loan the money out again at a higher interest rate. Waiving the prepayment penalty can induce borrowers to prepay.
In a mortgage, the term "default" may mean: A.failure to keep the property insured B.failure to make timely mortgage payments C.an unauthorized use of the property D.Any of the above
A.failure to keep the property insured B.failure to make timely mortgage payments C.an unauthorized use of the property D.Any of the above Delinquent payments are the most common form of default on a mortgage loan, but any violation of the terms of the loan agreement may be considered a default. So the lender could foreclose if borrower used the property illegally, failed to keep the property adequately insured, or failed to maintain the property in a manner that would protect the lender's investment.
Ron sold his home for $231,500 and carried back a $225,000 note secured by a deed of trust against the property. The home had a fair market value of $230,000. After several months, he decided to sell the note and deed of trust, and sold it at a discount to Maria for $215,000. On the note, he wrote "I assign this note to Maria without recourse." If the buyer of Ron's property were to default on payments, Maria would: Select your answer below: A.foreclose to recover $215,000 B.foreclose to recover $225,000 C.sue Ron for $215,000 D.sue Ron for $225,000
A.foreclose to recover $215,000 B.foreclose to recover $225,000 C.sue Ron for $215,000 D.sue Ron for $225,000 Because the note was without recourse, Ron has no further liability to Maria. The dispute over payments would be between Maria and the buyer of Ron's property. Maria would be able to foreclose up to the face value of the note, not just the discounted amount she paid for it.
When a deed of trust is terminated, the trustee will prepare a: A.gift deed B.reconveyance deed C.grant deed D.quitclaim deed
A.gift deed B.reconveyance deed C.grant deed D.quitclaim deed Once a deed of trust has been repaid, the trustee is required to execute and record a deed of reconveyance, releasing the property from the beneficiary's security interest.
The mortgagor in a purchase money mortgage would be the party who: A.holds the promissory note B.signs the promissory note C.lends the money D.begins a foreclosure action
A.holds the promissory note B.signs the promissory note C.lends the money D.begins a foreclosure action In any type of mortgage loan, the mortgagor is the borrower. And the borrower is the one who executes the promissory note and gives it to the lender as evidence of the debt.
If a trustor defaults on a deed of trust, the most expedient remedy available to the beneficiary is a/an: A.judicial foreclosure B.sheriff's sale C.trustee's sale D.unlawful detainer action
A.judicial foreclosure B.sheriff's sale C.trustee's sale D.unlawful detainer action Nonjudicial foreclosure through a trustee's sale is generally faster than judicial foreclosure.
A lender may refer to a loan in its portfolio as "seasoned." This would refer to the: A.length of the loan term B.market in which the loan may be sold C.low loan-to-value ratio D.pattern of timely payments by the borrower
A.length of the loan term B.market in which the loan may be sold C.low loan-to-value ratio D.pattern of timely payments by the borrower A loan that has a consistent pattern of timely payments by a borrower is referred to as "seasoned." To a secondary market investor, a seasoned loan would generally be more valuable than a recent loan with no track record to evaluate.
If the Federal Reserve implemented a tight money policy, that would increase the: A.number of single-family home sales B.amount of new home construction C.use of first deeds of trust to finance home purchases D.use of second deeds of trust to finance home purchases
A.number of single-family home sales B.amount of new home construction C.use of first deeds of trust to finance home purchases D.use of second deeds of trust to finance home purchases In a tight money market, interest rates increase. This may make it impossible for consumers to purchase properties that they would be able to purchase under normal economic conditions. To facilitate the sale of their property in a tight money market, sellers may need to provide secondary financing, taking back a second deed of trust to cover part of the purchase price and closing costs. In a tight money market, home sales and construction would be diminished because of the scarcity of funds.
A late payment charge may be permitted, under California law, on a mortgage payment on a house: A.one day after the due date B.five days after the due date C.on the tenth day after the due date D.more than ten days after the due date
A.one day after the due date B.five days after the due date D.more than ten days after the due date C.on the tenth day after the due date In California, if the security property is an owner-occupied single-family home, a late payment charge can't be imposed until at least ten days have elapsed after the due date.
A trustor wishes to transfer the property that he financed with a first deed of trust. He must: A.receive the beneficiary's permission B.sign and deliver the deed to the buyer C.pay the beneficiary in full D.pay a prepayment penalty
A.receive the beneficiary's permission B.sign and deliver the deed to the buyer C.pay the beneficiary in full D.pay a prepayment penalty There are no prohibitions against selling or otherwise transferring a property that is subject to a deed of trust. The trustor would be required to pay the beneficiary in full only if the deed of trust included an alienation clause, and the question doesn't say that it does. Similarly, the trustor would be required to pay a prepayment penalty only if that was provided for in the loan documents.
A lender who accepts a deed in lieu of foreclosure from a trustor will: A.receive the property free and clear of other loans B.take title subject to any junior liens C.seek a deficiency judgment from the trustor D.allow the trustor a reinstatement period to cure the default
A.receive the property free and clear of other loans B.take title subject to any junior liens C.seek a deficiency judgment from the trustor D.allow the trustor a reinstatement period to cure the default A lender who accepts a deed in lieu of foreclosure will take title subject to any existing liens other than its own. Before accepting a deed in lieu, the lender should determine whether the borrower has created junior liens.
An important characteristic of straight notes that differentiates them from installment notes is that straight notes: A.reduce the principal balance over the term of the loan B.have a higher interest rate than installment notes C.call for no principal payments during the term of the loan, only at the due date of the note D.apply compound interest
A.reduce the principal balance over the term of the loan B.have a higher interest rate than installment notes C.call for no principal payments during the term of the loan, only at the due date of the note D.apply compound interest A straight note requires no payments of principal during the term of the loan, only payments of interest. The principal balance is paid off as a balloon payment at the end of the loan term.
If the employment rate and the gross national product both go up, it can be expected that: A.the level of personal income will increase B.new home construction will increase C.sales of existing homes will increase D.All of the above
A.the level of personal income will increase B.new home construction will increase C.sales of existing homes will increase D.All of the above The employment rate and the gross national product are both useful indicators of the economy's general health. If these indexes are increasing, it can be expected that workers will be making more money and will be more likely to purchase houses, and that homebuilders will respond to that by increasing construction.
In construction financing, the final disbursement of funds will not be made until: A.the notice of completion has been recorded B.the statutory period for filing a mechanic's lien has expired C.the project has been completed D.all the materials have been delivered
A.the notice of completion has been recorded B.the statutory period for filing a mechanic's lien has expired C.the project has been completed D.all the materials have been delivered The final distribution of funds will not occur until after the period for filing mechanic's liens has expired.
All of the following factors would influence the movement of mortgage interest rates directly, except: A.the rate of unemployment B.a tight money market C.the rate of inflation D.scarcity of mortgage funds
A.the rate of unemployment B.a tight money market C.the rate of inflation D.scarcity of mortgage funds In an inflationary market, interest rates would tend to rise. When interest rates are high and available funds are scarce, it is known as a tight money market. On the other hand, the rate of unemployment has no direct impact on the supply of and demand for mortgage funds. (It may, however, affect the money market indirectly. Higher unemployment generally means that fewer people are able to consider purchasing homes, so that the demand for mortgage funds decreases.)
Once a trustee issues a notice of default, the trustee must wait three months before: A.the trustee's sale B.publication of the notice of sale C.taking possession D.the end of the redemption period
A.the trustee's sale B.publication of the notice of sale C.taking possession D.the end of the redemption period Three months after the notice of default, the trustee issues a notice of sale. The notice of sale must be recorded, posted on the property, and published in a newspaper of general circulation.
If a deed of trust is foreclosed through a judicial process: A.there may be no deficiency judgment B.the action will follow the steps used in a trustee's sale C.there will be up to a one-year redemption period D.the trustee must still give a notice of default to the borrower
A.there may be no deficiency judgment B.the action will follow the steps used in a trustee's sale C.there will be up to a one-year redemption period D.the trustee must still give a notice of default to the borrower If a deed of trust beneficiary chooses judicial foreclosure instead of a trustee's sale, the court will apply the same rules that would apply in the judicial foreclosure of a mortgage. Just like a mortgagor, the trustor will be entitled to a statutory redemption period that may last up to one year. And the court will grant a deficiency judgment to the beneficiary under the same circumstances in which a mortgagee would be entitled to a deficiency judgment.
A lender would most likely accept a deed in lieu of foreclosure from a: A.trustee after the trustor reinstates a defaulted loan B.trustor who has defaulted on a deed of trust and doesn't have the means to reinstate the loan C.trustee if there is no purchaser of the property at a trustee's sale D.court of law if it waives the right to a deficiency judgment in a judicial foreclosure
A.trustee after the trustor reinstates a defaulted loan B.trustor who has defaulted on a deed of trust and doesn't have the means to reinstate the loan C.trustee if there is no purchaser of the property at a trustee's sale D.court of law if it waives the right to a deficiency judgment in a judicial foreclosure A trustor who has defaulted on his loan and can't cure the default may ask the lender if it will accept a deed in lieu of foreclosure in order to satisfy the debt.
The power of sale is an authorization to sell property securing a deed of trust in the event of default, given by the: A.trustee to the trustor B.trustor to the trustee C.trustee to the beneficiary D.beneficiary to the trustor
A.trustee to the trustor B.trustor to the trustee C.trustee to the beneficiary D.beneficiary to the trustor In a deed of trust, the trustor gives the power of sale to the trustee. The power of sale authorizes the trustee to sell the property in the event of a default by the trustor.
A deed of trust may be foreclosed by: A.trustee's sale only B.judicial process only C.either trustee's sale or judicial process D.trustee's sale in conjunction with a deficiency judgment
A.trustee's sale only B.judicial process only C.either trustee's sale or judicial process D.trustee's sale in conjunction with a deficiency judgment A deed of trust is usually foreclosed in a trustee's sale. However, a deficiency judgment is prohibited in a nonjudicial foreclosure, so a lender who wants a deficiency judgment may choose judicial foreclosure instead.
A promissory note that is secured by real property is: A.used as security for a deed of trust B.used in all real estate transactions C.evidence of the debt D.considered real property
A.used as security for a deed of trust B.used in all real estate transactions C.evidence of the debt D.considered real property A promissory note is evidence that the maker of the note owes money to a lender. The promissory note is secured by a deed of trust or a mortgage, not vice versa. (A promissory note is used in virtually all real estate loan transactions, but not in all real estate transactions. For example, a promissory note is not used in a land contract sale.)
In California, a note secured with a deed of trust can be prepaid without penalty: A.when the prepayment is made more than five years after the original loan date B.if a buyer is assuming the loan C.if an alienation clause forces the payment of the entire loan balance upon sale of the property D.at any time, regardless of whether there is a prepayment penalty clause
A.when the prepayment is made more than five years after the original loan date B.if a buyer is assuming the loan C.if an alienation clause forces the payment of the entire loan balance upon sale of the property D.at any time, regardless of whether there is a prepayment penalty clause For loans secured by owner-occupied residential properties with four units or less, California law prohibits lenders from charging a prepayment penalty more than five years from the date the loan was originated. Even during the first five years, the borrower must be allowed to prepay up to 20% of the original principal amount in any twelve-month period without penalty. There are also limits on penalty amounts.
A straight note: A.will involve a balloon payment B.is often secured by a deed of trust C.only requires payment of interest during the loan term D.All of the above
A.will involve a balloon payment B.is often secured by a deed of trust C.only requires payment of interest during the loan term D.All of the above With a straight note, a borrower repays only interest during the loan term and then pays the entire principal balance as a balloon payment at the end of the loan term. A straight note may be used in a real estate transaction and secured by a mortgage or deed of trust, just like an installment note.
Also called a due-on-sale clause, a/an _______________ gives the lender the right to demand that the entire loan balance be paid in full at once if the borrower sells the mortgaged property.
Alienation Clause
If each borrower on a promissory note could be held liable for the entire amount due, the note would state that the borrowers are "individually" liable.
False The promissory note would state that the borrowers are "jointly and severally" liable for the debt.
The essential elements of a promissory note include a description of the property, the interest rate, the amount borrowed, and the names of the borrower(s) and the lender.
False The property description is included in the security instrument, but not the promissory note. The interest rate, the amount borrowed, and the names of the parties are included in the note.
Its original purpose was to provide a secondary market for FHA-insured loans; today it buys conventional and VA loans as well.
Fannie Mae Fannie Mae started out as a federal agency in 1938, and its original purpose was to buy FHA loans.
A _______________ occurs when the federal government spends more money than it takes in.
Federal Deficit
The original purpose of this GSE was to provide a reliable secondary market for savings and loan associations.
Freddie Mac's Freddie Mac's original purpose was to assist savings and loans, which were particularly hard hit by the recession of 1969-70.
The _______________ is the measure of goods and services produced in the nation during one calendar year.
Gross Domestic Product
Investment vehicles created from pools of FHA and VA mortgages.
Mortgage-Backed Securities Fannie Mae and Freddie Mac buy and bundle loans to create investment securities. Sales of MBS help provide a flow of funding to primary mortgage lenders.
The words "or more" in the promissory note indicate that a/an _______________ will not be charged.
Prepayment Penalty
The finance market in which home buyers apply for mortgage loans.
Primary Market
By increasing the _______________, the Fed can reduce the amount of money banks have available to lend.
Reserve Requirements
The market that helps moderate real estate cycles by transferring funds from areas where there is an excess to areas where there is a shortage.
Secondary Market The secondary market consists of private investors, government agencies, and government-sponsored enterprises that buy and sell real estate mortgage loans nationwide.
In open market operation, the Federal Reserve buys and sell government _________________
Securities
Often found in security instruments for land that will be used for construction, a/an _______________ states that the instrument will have lower lien priority than another mortgage or deed of trust to be executed in the future.
Subordination Clause
The interest paid on a real estate loan is simple interest.
True It's simple interest because it's computed annually on the remaining principal balance.
A third-party purchaser of a promissory note with no knowledge of any defects is called a holder in due course.
True The purchaser of a note (for example, a secondary market investor) is a holder in due course if she purchases it for value, in good faith, and with no knowledge of defects.
State laws that set maximum allowable interest rates are called usury laws.
True Usury laws set maximum allowable interest rates.
The criteria lenders use to evaluate a loan applicant and the property offered as security, to determine whether they are a good risk.
Underwriting Standards Lenders use underwriting standards to qualify borrowers and the property offered as security for loans. Investors are willing to buy mortgage loans from primary lenders when uniform standards are used.
