Ch. 12 Residential mortgages

the loan to value ratio LTV is 80%. a buyer wants to acquire a property with a purchase price of $136,000. calculate the required down payment.

$136,000x.20=$27,000

a borrower is getting a loan for $225,000 at 5% interest, and the lender is charging 2 points. what will the borrower pay for the points?

$225,000x.02=$4,500 cost of points

what is the loan to value ratio LTV for a home purchased for $315,000 with a loan of $283,500?

$283,000/$315,000=.9 or 90% LTV

5. A borrower who is in default on a mortgage is allowed to prevent the lender from foreclosing on the property by paying the mortgagee the delinquent principal and interest, plus any expenses the mortgagee has incurred in attempting to collect the payments. This right is called A. novation. B. a satisfaction of mortgage C. the equity of redemption. D. an acceleration clause.

.C. the equity of redemption.

20. The market value of an apartment building is $350,000. The investor has leveraged $300,000. What is the investor's equity in the property? A. $50,000 B. $300,000 C. $350,000 D. $650,000

A. $50,000

17. The rule of thumb used to convert discount points to an annual percentage rate is that each discount point increases the yield by approximately A. 1/8 of 1% B. 1/4 of 1% C. 1/2 of 1% D. 1%

A. 1/8 of 1%

10. If a mortgagee does NOT want the mortgage to be paid ahead of schedule, the mortgage will normally contain A. a prepayment penalty clause B. a redemption clause C. a defeasance clause D. an acceleration clause

A. a prepayment penalty clause1

16. A mortgagor defaulted on a mortgage encumbering an apartment complex. Once the foreclosure procceedings were filed, the lender appealed to the courts to appoint A. a receiver. B. an onsite manager. C. an attorney to handle the case. D. an arbitrator.

A. a receiver.

6. A lender declares all the unpaid balance due and payable as a result of default. The lender is exercising the A. acceleration clause. B. due-on-sale clause. C. defeasance clause. D. right to reinstate clause.

A. acceleration clause.

12. The loan-to-value ratio is 80%. A buyer wants to acquire a property with a purchase price of $116,000. Calculate the required down payment. A. $20,000 B. $23,200 C. $32,800 D. $92,800

B. $23,200

18. A lender charged 7% plus 3 points. What is the approximate yield on this loan? A. 7.25% B. 7.375% C. 7.5% D. 7.75%

B. 7.375% 0.125x3=0.375 0.375+7=7.375

1. In a mortgage transaction in Florida, the legal evidence of the personal debt is the A. property (collateral). B. note C. mortgage instrument. D. borrower's credit history.

B. note

15. A couple purchased their home for $125,000. They financed the purchase with an 80% conventional loan. The mortgagee charged 2.5 points. Calculate the actual cost of the points in dollars. A. $1,600 B. $2,000 C. $2,500 D. $3,125

C. $2,500 2.5points=0.125 0.125x.80=0.25

11. A buyer agrees to purchase a property with an existing mortgage lien. In which situation is the new buyer the only party responsible for the debt? A. Assumption of an existing mortgage B. Estoppel C. Novation D. Subject to the mortgage

C. Novation

9. A couple has just made the final mortgage payment on their home. What document must the mortgagee file on their behalf? A. Lis pendens B. Novation C. Satisfaction of mortgage D. Estoppel certificate

C. Satisfaction of mortgage

14. When a lis pendens is filed properly with the county clerk, it becomes a type of A. attachment on the subject property. B. vendor's lien. C. constructive notice. D. easement by prescription.

C. constructive notice.

2. A financing vehicle in which the vendor holds title to the property until the buyer has met the stated obligations is a A. balloon mortgage. B. purchase-money mortgage. C. contract for deed. D. term mortgage.

C. contract for deed.

3. In title theory states, the mortgage clause that provides that the conveyance of title to the lender is defeated when all the terms of the agreement have been fulfillled is the A. penalty clause. B. release clause. C. defeasance clause. D. insurance clause.

C. defeasance clause.

13. The primary purpose of an estoppel certificate is to A. prevent foreclosure. B. relieve the mortgagor of personal liability for the debt. C. verify the loan balance. D. prevent transfer of title to the mortgagee.

C. verify the loan balance.

19. You have a loan with monthly principal and interest payments of $846.21. If the lender requires an impound account for taxes and insurance, what would the total payment amount be if your annual property taxes were $2,840 and your annual insurance cost was $1,570? A. $1,082.88 B. $1,130.38 C. $1,193.71 D. $1,213.71

D. $1,213.71 2,840/12=236.67 1,570/12=130.83 236.67+130.83+846.21=$1,213.71

4. A home was purchased with a down payment of $50,000 and a loan of $200,000 at 6% interest for 20 years. Monthly payments are $1,432.86. What is the loan-to-value ratio? A. 25% B. 70% C. 75% D. 80%

D. 80%

7. The person who borrows money to help pay for the purchase of real property is called at various times the A. lender. B. mortgagee. C. lienor. D. mortgagor.

D. mortgagor.

8. When a vendee buys "subject to the mortgage" the A. vendee becomes responsible for the note. B. original obligation is substituted with a new note by novation. C. vendor is relieved of the obligation for the promissory note. D. vendee is not responsible for the note.

D. vendee is not responsible for the note.

The loan-to-value ratio is 80%. A buyer wants to acquire a property with a purchase price of $116,000. Calculate the required down payment. A) $23,200 B) $32,800 C) $20,000 D) $92,800

The answer is $23,200. The required down payment is $23,200: $116,000 × .2 = $23,200.

A home was purchased with a down payment of $50,000 and a loan of $200,000 at 6% interest for 20 years. Monthly payments are $1,432.86. What is the loan-to-value ratio? A) 25% B) 80% C) 75% D) 70%

The answer is 80%. $50,000 down payment + $200,000 loan = $250,000 purchase price; $200,000 ÷ $250,000 = .80

If a mortgagee does NOT want the mortgage to be paid ahead of schedule, the mortgage will normally contain A) a redemption clause. B) a prepayment penalty clause. C) an acceleration clause. D) a defeasance clause.

The answer is a prepayment penalty clause. If a mortgagee does not want the mortgage to be paid ahead of schedule, the mortgage will normally contain a prepayment penalty clause.

A lender declares all the unpaid balance due and payable as a result of default. The lender is exercising the A) defeasance clause. B) acceleration clause. C) right to reinstate clause. D) due-on-sale clause.

The answer is acceleration clause. The lender is exercising the acceleration clause.

When a property is sold "subject to the mortgage," the A) original obligation is substituted with a new note by novation. B) buyer becomes responsible for the note. C) buyer is not responsible for the note. D) seller is relieved of the obligation for the promissory note.

The answer is buyer is not responsible for the note. When property is sold "subject to the mortgage," the buyer is not personally liable to the lender for payment of the mortgage debt.

A type of seller financing in which the vendor holds legal title to the property until the buyer has repaid the debt is a A) balloon mortgage. B) contract for deed. C) purchase-money mortgage. D) term mortgage.

The answer is contract for deed. The buyer takes possession of the property at closing and receives equitable title to the property until the debt is repaid. Once the debt is repaid, the purchaser receives legal title.

In title theory states, the mortgage clause that provides that the conveyance of title to the lender is defeated when all the terms of the agreement have been fulfilled is the A) release clause. B) insurance clause. C) defeasance clause. D) penalty clause.

The answer is defeasance clause. In title theory states, the mortgage clause that provides that the conveyance of title to the lender is defeated when all the terms of the agreement have been fulfilled is the defeasance clause.

The person who borrows money to help pay for the purchase of real property is called at various times the A) lienor. B) mortgagor. C) lender. D) mortgagee.

The answer is mortgagor. The mortgagor is the borrower (debtor).

In a mortgage transaction in Florida, the legal evidence of the personal debt is the A) borrower's credit history. B) mortgage instrument. C) property (collateral). D) note.

The answer is note. In a mortgage transaction in Florida, the legal evidence of the personal debt is the note.

A buyer agrees to purchase a property with an existing mortgage lien. In which situation is the new buyer the only party responsible for the debt? A) Assumption of an existing mortgage B) Estoppel C) Subject to the mortgage D) Novation

The answer is novation. A novation agreement makes the buyer solely responsible for any default on the mortgage loan.

A couple has just made the final mortgage payment on their home. What document must the mortgagee file on their behalf? A) Lis pendens B) Estoppel certificate C) Satisfaction of mortgage D) Novation

The answer is satisfaction of mortgage. The mortgagee must file the satisfaction of mortgage on behalf of the couple.

A borrower who is in default on a mortgage is allowed to prevent the lender from foreclosing on the property by paying the mortgagee the delinquent principal and interest, plus any expenses the mortgagee has incurred in attempting to collect the payments. This right is called A) an acceleration clause. B) novation. C) the equity of redemption. D) a satisfaction of mortgage.

The answer is the equity of redemption. This right allows the mortgagor, before a foreclosure sale, to reclaim the property by paying the indebtedness.

A borrower is getting a loan for $250,000 at 4% interest. The lender is charging 2 points. The borrower will be charged $10,000 for the points. t/f

The statement is false. $250,000 loan × .02 points = $5,000 points

A note requires that the lender be liable for paying the borrower according to the agreed-upon terms of the loan. t/f

The statement is false. A note represents the borrower's promise to pay the lender according to the agreed-upon terms of the loan.

A prepayment penalty clause is normally included in FHA and VA mortgages on real property. t/f

The statement is false. A prepayment clause (not prepayment penalty clause) is normally included in FHA and VA mortgages, allowing the borrower to pay off part or all of the debt without penalty before loan maturity.

When allowing a buyer to assume an existing mortgage, the seller should require the parties to execute a partial release clause to prevent future liability should the buyer default on the assumed mortgage debt. t/f

The statement is false. A written novation makes the buyer solely responsible for any default on the mortgage loan.

Each discount point lowers the lender's yield. t/f

The statement is false. Discount points are a method for increasing a lender's yield.

In lien theory states, the lender retains title to the property. t/f

The statement is false. In lien theory states, the borrower retains title to the property.

The defeasance clause prevents a buyer from assuming the mortgage. t/f

The statement is false. The defeasance clause in a Florida mortgage releases the mortgage lien once the debt is paid in full.

The lender assigning the mortgage to another company (investor) is the assignee. t/f

The statement is false. The lender assigning the mortgage to another company (investor) is the assignor. The assignor signs the assignment of mortgage and delivers it to the assignee.

Under a contract for deed, the vendee is granted unilateral title. t/f

The statement is false. Under a contract for deed, the vendee (purchaser) is granted equitable title.

The current market value of a home is $300,000. There is a mortgage loan on the property of $240,000. The homeowners have $60,000 equity in their home. t/f

The statement is true. $300,000 market value - $240,000 mortgage debt = $60,000 equity.

A lender is charging an origination fee of 1.5% on a new mortgage loan of $300,000. The cost of the loan origination fee is $4,500. t/f

The statement is true. $300,000 × .015 = $4,500.

A home was purchased for $406,250. The buyer received a mortgage loan for $325,000. The LTV is 80%. t/f

The statement is true. $325,000 loan ÷ $406,250 purchase price = .80 or 80% LTV

A lis pendens is a type of constructive notice indicating that the property is involved in pending legal action. t/f

The statement is true. A lis pendens is constructive notice of pending legal action that involves real estate.

An estoppel certificate verifies the unpaid loan balance, interest rate, and the date to which interest has been paid before the assignment of a mortgage instrument. t/f

The statement is true. An estoppel certificate (or estoppel letter) verifies the amount of the unpaid balance, the interest rate, and the date to which interest has been paid.

The pledging of property as security for repayment of debt is called hypothecation. t/f

The statement is true. Hypothecation refers to the pledging of property as security for repayment of a loan without surrendering possession of the property.

The loan-to-value ratio is 90%. A buyer wants to acquire a property with a purchase price of $350,000. The buyer's down payment is $35,000. t/f

The statement is true. The down payment is 10% of the purchase price. $350,000 × .10 = $35,000.

A deed in lieu of foreclosure is a nonjudicial procedure. t/f

The statement is true. The process is sometimes called a friendly foreclosure because it is a nonjudicial procedure (it does not involve a lawsuit).

The right to reinstate is the mortgagor's right to reinstate the original repayment terms in the note after the lender initiated the acceleration clause. t/f

The statement is true. The right to reinstate clause provides for the mortgagor's right to reinstate the original repayment terms in the note after the mortgagee has initiated the acceleration clause.

When a property is sold subject to the mortgage, the buyer is NOT personally obligated to pay the debt in full. t/f

The statement is true. When a property is sold subject to the mortgage, the buyer is not personally obligated to pay the debt in full.

When default occurs, the lender has the right under the mortgage contract to pursue legal action against the borrower for payment of the debt. t/f

The statement is true. When default occurs, the lender has the right under the mortgage contract to pursue legal action against the borrower for payment of the debt.

An assignment is when ownership of a mortgage is transferred from one company to another company. t/f

The statement is true. When ownership of a mortgage is transferred from one company or individual to another, it is called an assignment.

Mortgage clauses (matching) prepayment clause, due on sale clause, defeasance clause, acceleration clause a. allows the lender to require immediate payment in full if the property is sold without the lenders consent b. requires the lender to release the mortgage lien once the debt is repaid c. allows the borrower to pay the debt off early without penalty d. authorizes the mortgage to advance the due date of the entire unpaid balance under certain conditions

a. due on sale clasue b. defeasance clasue c. prepayment clause d. acceleration clasue

if a borrower is in default, the ____ clause allows the lender to call the entire loan balance due and payable.

acceleration

The parties to an assignment of mortgage are the seller/lender called the _______________ and the purchaser of the mortgage loan and promissory note called the _____________.

assignor, assingee

the ____ clause in a mortgage in florida releases the mortgage lien once debt is paid in full.

defeasance

The right of a mortgagor in default to pay all money owed, including principal, interest, and the expenses occurred in initiating a foreclosure proceeding is called the ____ of _____.

equity of redemption

prepaid property taxes and hazard insurance costs are held by the lender in an _____ ______.

escrow account

an ___ ____ verifies the unpaid loan balance, interest rate, and the date to which interest has been paid before the assignment of a mortgage instrument.

estoppel certificate

discount points are charged by the lender to ___ the ___ on a mortgage loan.

increase, yield

in a ____ theory state, the borrower or _____ retains title to the property.

lein, mortgager

a ____ ___ is constructive notice of pending legal action that involves a parcel of real estate.

lis pendens

the mortgagor gives a mortgage as security to the ____.

mortgagee

Any surplus funds remaining after all liens have been paid after a foreclosure sale belong to the ____________________.

mortgagor

2 parties to a mortgage, along with their common names

mortgagor (borrower/debter), mortgagee (lender/creditor)

a deed in lieu of foreclosure is a ____ procedure because the defaulting mortgagor transfers the deed tot he lender in lieu of a foreclosure process.

nonjudicial

the legal instrument that contains the amount of the loan, interest rate and payment provisions is called a ______.

note

a seller who allows a purchaser to assume the existing mortgage should have the lender and the purchaser agree to execute a _____ agreement.

novation

the clause in a blanket mortgage that allows a parcel of property to be sold free and clear of the blanket mortgage upon payment of a specified amount is the ____ ___ clause.

partial release

a mortgage is the instrument that pledges the property as ____ for the debt.

security (collateral)

a ___ _____ involves a real estate transaction where the net proceeds at closing will not satisfy the payoff amount of mortgages and other liens on the property.

short sale

when mortgage property is sold ____ to the mortgage, the buyer takes over the balance of the existing mortgage and the seller remains solely responsible for a deficiency judgment.

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