Unit 12 Quiz

The sale price of the property is $250,000and the appraised is $240,000 at an 80% LTV. What is the loan amount of the property?

$192,000; The LTV is based on the purchase price or the appraised value, whichever is lower. The appraised value was lower, so it will be used to calculate the loan amount, which will be 80% of $240,000 x 0.080 = $192,000

An instrument used to pledge real property as security for a loan is ...

A mortgage; The document with which real property is pledged as security or collateral for a debt is the mortgage.

The BEST way to prove payment in full of a loan is ...

A notice of satisfaction notice. A deed of trust requires a reconveyance deed. Both documents should be recorded by the borrower.

A buyer just found out that she cannot assume the seller's loan on the property she is purchasing. Which mortgage clause indicated to the buyer that the loan was NOT assumable...

Alienation Clause; The alienation clause (due on sale) clause determines whether a loan is assumable.

A mortgage with a rate that is tied to an economic index and may have interest rate or payment caps is ...

An adjustable rate mortgage; The interest rate on an ARM is subject to change based on increases or decreases in a specific economic index.

A loan amoritized over 30 yearsbut due and payable in 10 years is what type of loan amount of the property?

Balloon; The loan payments are amortized over 30 years, but only 10 years of payments will be made due to the 10 year term. The loan will have a large balloon payment .

The acceleration clause in the note and deed of trust...

Can be used if the borrower has not maintained the property and therefor is in default . The acceleration claise may be used anytime the borrower is in default, such as not maintaining the property and committing waste. The acceleration clause does not allow the lender to change the terms of the loan or arbitrarily call the note due.

A form of seller financing in which the seller retains title but the buyer has the right of possession is ...

Contract for deed; The seller retains legal title under a contract for deed; the buyer has equitable title and possession of the property.

All of the following documents are used in real estate to create a lien and provide evidence of the debt EXCEPT

Deed ; A deed transfers title from one owner to another and is not used in the loan process.

The document that creates security for a promissory is...

Deed of Trust; A deed of trust is a security instrument that creates a lien when recorded.

In a foreclosure, if there are insufficient proceeds, the lender may file...

Deficiency judgment; If the sale proceeds are insufficient to satisfy the debt, the lender may be able to claim a deficiency judgement against the borrower.

Which of the following BEST describes a real estate professional's role in seller financing ?

Ensuring the seller and the buyer understand the risk involved. The Real Estate professional should be able to explain how seller financing works and recommend that the parties to the transaction receive professional advice regarding the risks involved in seller financing.

Predatory lending practices include...

Includes offering loans to buyers who dont understand the loan terms, Pressing the borrower to accept different terms at closing, Targeting vulnerable groups who do not understand the lending process. Predatory lending is an umbrella term for unfair or illegal lending practices. Groups targeted include the elderly, minorities, those less educated, and persons who do not speak English as their primary language.

A lender charges four discount points on a $150,000 loan. The points will...

Increase the lender's yield on the loan. Discount points increase the lender's yield on the loan.

Which of the following is TRUE of a promissory note?

It is a promise to pay; The note establishes a promise to pay. The note establishes a promise to repay a debt.

All of the following are true of a promisory note EXCEPT ...

It is recorded; The promissory note is not recorded. The mortgage or deed of trust is recorded and creates the lien against the property.

Which of these terms are closer in meaning...

Lender, mortgagee; The lender is the mortgage; the borrower is the mortgagor.

The fee that is charged by lenders as part of their processing and is similar to a commission is called ...

Loan Origination ; The loan origination fee is similar to the mortgage loan originator's commission.

Which statement BEST describes a blanket loan?

More than one property is pledged as security for the loan. A blanket mortgage covers two or more parcels of real estate.

All of the following statements are true regarding discount points EXCEPT...

Points are always paid by the buyer. Discount points are charged to the buyer, but can be paid by the buyer or the seller, based on tradition or the negotiated terms of the purchase contract.

The document that is recorded to give notice that a deed of trust has been paid in full is...

Reconveyance Deed; The document is called a Reconveyance Deed of Trust, which will release the lien that was created by the original deed of trust and Transfer legal title from the trustee back to the borrower.

Interest charged on mortgage loans is typically ...

Simple; Simple interest is charged on most mortgage loans not compound, floating, or discount interest.

Which type of loan requires interest only payments until maturity of the principal?

Term Loan; A term loan or straight loan requires interest only payments until maturity, at which time the entire principal balance must be paid in full.

The clause appearing in both the promissory note and the deed of trust that allows the lender to call the balance due and payable in full upon default is known as ...

The Acceleration clause. The acceleration clause allows the lender to "call the note" upon default.

The loan to value ratio (LTV) mortgage amount divided by the sales price or appraised value of the property- determines al of these except...

The amount of interest for each payment; The LTV is used to determine the loan amount; which in turn determines the cost of each discount poin,

The disadvantages of being highly leveraged is that ...

The borrowers are more likely to default. The disadvantage to high leverage is that the borrower may default on the loan, especially if market values start to drop.

When using a contract for deed, all of the following are true EXCEPT...

The buyer has possession and legal tile throughout the contract; In contract for deed financing, the buyer receives equitable title and possession of the property. The seller retains legal title until the contract is paid in full.

Owners' equity in their property is best described as...

The difference between the current market value and the amount owed. Todays value minus todays debt equals today's equity.

The right of the borrower to reclaim the property before the foreclosure sale is ...

The equitable redemption; the period before the foreclosure sale is known as the equitable redemption period.

The ARM loan adjustment rate is determined by...

The index in the mortgage; ARM loans adjust based on the margin and the index listed in the mortgage.

Three properties are each valued at $120,000. The first property has a loan of $95,000, the second has a loan of $60,000 and the third has no liens. The property with the highest leverage is ...

The one with the $95,000 loan. The property with the hghest loan amount of $95,000 loan. The property with the highest loan amount of $95,000 is the most highly leveraged (has used the highest amount of borrowed money)

Principal is defined as ...

The original amount of the loan; Principal is the total or original amount of the loan. Payments are first applied to interest and then to principal.

Charging an interest rate that exeeds the legal maximum ceiling is known as ...

Usuary; Usury rates are set by state law. A loan in which the rate exceeds the legal maximum ceiling is said to be usurious loan.