Unit 12 Exam

The charge for the use of money is

interest on the remaining principal.

A type of foreclosure that allows the property to be sold by court order is

judicial foreclosure

The general types of foreclosure proceedings are

judicial, nonjudicial, and strict foreclosure.

In a deed of trust, the borrower gives

legal title to the trustee.

A credit score can range from

300 to 850.

A lender uses which of the following to make a lending decision for a mortgage loan?

Borrower's credit report, Borrower's debt-to-income ratio, & Borrower's credit score

The database of consumer claims history available to insurance companies is the

Comprehensive Loss Underwriting Exchange.

What type of foreclosure is sometimes called friendly foreclosure?

Deed in lieu of foreclosure

The seller told the listing broker that the seller's loan was assumable. Upon reviewing the seller's loan documents the listing broker found the mortgage was not assumable and the seller would have to pay off the mortgage upon sale. What clause did the listing broker discover upon reading the mortgage document?

Due-on-sale clause

In a certain state, a mortgagee holds a lien on real property offered as collateral for a loan. The mortgagor retains both legal and equitable title to this real property. The state where this real property is located is BEST characterized as which type?

Lien theory

What clause in a mortgage would require a borrower to pay a penalty for payments made ahead of schedule?

Prepayment clause

A mortgage company charges borrowers a 1.5% loan origination fee. What will the mortgage company charge as a fee if the asking price of a house was $235,000, the sales price is $210,000, and the buyer is making a down payment of $50,000?

The answer is $2,400. The buyer's loan origination fee is $2,400: ($210,000 - $50,000) × 1.5% = $2,400. The asking price is not relevant to this problem.

A building was sold for $715,000. Earnest money in the amount of $65,000 was deposited in escrow, and the buyer obtained a new loan for the balance of the purchase price. The lender charged two discount points on the loan. What was the total amount of cash used by the buyer for this purchase?

The answer is $78,000. $715,000 sales price - $65,000 earnest money = $650,000 loan balance; $650,000 × 2% (0.02) discount points = $13,000; $65,000 earnest money + $13,000 discount points =$78,000 cash used by buyer.

At closing, the buyer paid discount points totaling $6,187.50 on a loan of $225,000. How many points did the buyer pay?

The answer is 2.75. Divide the dollar amount of the discount points paid by the amount borrowed, and move the decimal point in the resulting figure two places to the right to find the number of discount points paid. $6,187.50 ÷ $225,000 = 0.0275, which is 2.75% or 2.75 points

When a homeowner defaulted on a home loan, the trustee immediately sold the property to recover the debt. The trustee acted under the terms of the security instrument. Based on these facts, which of these statements is TRUE?

The exercise of this power of sale clause is an example of nonjudicial foreclosure.

How does an acceleration clause help lenders?

Without the acceleration clause, lenders would have to sue the borrower for every overdue payment.

A borrower defaulted on a mortgage loan, leaving an unpaid balance of $95,000. After receiving only $85,000 from the sale of the property, the lender filed for

a deficiency judgment.

A homebuyer has a mortgage that provides for increasing payments over the life of the loan so that it can be paid off earlier than would be the case with a regular amortized loan. The homebuyer has

a growing-equity mortgage.

A borrower wants to obtain a loan that will allow regular payments of principal and interest for five years and then a final balloon payment to pay off the remaining principal balance. This type of loan is known as

a partially amortized loan.

The Consumer Financial Protection Bureau requires mortgage lenders to

allow a borrower to seek review of a decision about a loan workout request.

Lenders charge a loan origination fee to

cover the expenses involved in generating the loan.

A consumer's income, outstanding loans, and other financial factors, will be reflected in the consumer's

credit score

Lenders usually look at a loan applicant's percentage of

debt to income

The seller agrees to sell the house to the buyer for $100,000. The buyer is unable to qualify for a mortgage loan for this amount, so the seller and the buyer enter into a contract for deed. The interest the buyer has in the property under a contract for deed is

equitable title

In one state, a lender holds a lien on real property offered as collateral for a loan. The borrower retains both legal and equitable title to real property. If the borrower defaults on the loan, the lender must go through formal foreclosure proceedings to recover the debt. This state can be BEST characterized as what kind of state?

lien theory

Most lenders charge borrowers to cover the expenses in generating a mortgage loan. This charge is known as a

loan origination fee.

The amount of the loan as a percentage of the purchase price of a property is known as

loan-to-value ratio

Most adjustable-rate mortgages (ARMs) have two types of rate caps called

periodic and life of the loan

Which of the following allows a mortgagee to proceed to a foreclosure sale without going to court first?

power of sale

The mortgage disclosure rules issued by the Consumer Financial Protection Bureau, which took effect in 2014, require a mortgage lender to do all of the following EXCEPT

require maximum insurance coverage by the borrower.

When a borrower defaults, a mortgage lender acquires full legal title to the property using

strict foreclosure

The clause that appears in both the promissory note and the mortgage, and allows the lender to call the balance due and payable in full upon default, is known as

the acceleration clause.

The two parts of a mortgage loan are

the debt itself and the security for the debt.

A homeowner's equity in the property is

the difference between the property's market value and the amount still owed on it.

When a deed of trust is the security instrument, which party usually chooses the trustee?

the lender

Charging more interest than is legally allowed is called

usury

What is the term that refers to a lender charging an interest rate that is higher than that permitted by law?

usury