CH 14

The most common adjustment for an ARM payment is

1 year

A borrower is considering an ARM mortgage from the first lender at a 2% margin and a comparable loan from a second lender at a 3% margin. The loan from the first lender

Lower loan payments

A corporation build a building to its exact specifications. It wants to pull out it's capital to use for other purposes. The best financing option is the

Sale and leaseback

Possession without the need to immediately finance the full purchase price of the property can be achieved by using a

Lease with option to buy

Real estate agents who participate in creative financing arrangements in order to make sales should be careful to avoid participating in transactions which could result in

The loss of their license

Which of the following statements is true regarding seller financing?

The seller of the property is the mortgagee under the mortgage

The purpose of an ARM is to more closely match what the lender receives in interest to

The yield available from other types of investments

ARM mortgages with teaser rates are avoided by mortgage insurers because

They can lead to early foreclosure when the rates are increased

A couple, both 65 years old, own their home free and clear. They are retired and need supplementary income for living expenses. They have been offered a reverse mortgage by their local savings and loan association. Which of the following statements is not correct?

They must make monthly payments of interest only on the loan

A sale may be made and financed under a contract for deed

By combining wraparound financing with an existing mortgage on the property, provided the existing mortgage does not contain a due on sale clause

If a buyer is purchasing a fully furnished condominium, she would most likely obtain a

Package mortgage

A woman is building a new home and has secured a construction loan from her local bank. When the house is finished, she plans to pay off the construction loan with a permanent loan from the savings and loan association. Which of the following statements is correct?

The permanent loan will be a takeout loan

A purchase agreement for a new condominium unit calls for the refrigerator to be financed along with the purchase of the unit. Which of the following statements is not true

The rate of interest on the value of the refrigerator may be higher than that on the real property

When considering an ARM mortgage, the lender must explain to the borrower, in writing, the

Worst case scenario

When an existing loan at a low interest-rate is refinance by a new loan at an interest rate between the current market rate and the rate on the old loan, the result is a

blended loan

The office of thrift supervision authorizes saving institutions to make

Adjustable rate loans

Borrowers need to consider which of the following when selecting an ARM?

Adjustment period, interest rate, payment cap

A reverse mortgage would most likely be utilized by

An elderly couple

The benefit of ARM loans for borrowers is the lenders offer

Carry lower initial interest rates

Which of the following would discourage the use of a wraparound mortgage?

It is useless when the first mortgage carries a due on sale clause

To the borrower, as compared to a fixed rate loan of the same maturity, and ARM mortgage loan offers a borrower the following advantages except

Lower settlement costs

Which of the following is not correct with regard to blanket mortgages?

Neither property may be sold until the entire debt is repaired

One major disadvantage to the borrower of an ARM is

Possible negative amortization

In response to consumers concern over adjustable rate mortgages creditors must provide consumers with more extensive information about the variable rate feature of ARMs by disclosure under

Regulation Z

A couple own their home which is presently worth approximately $150,000. They have an existing fixed rate first mortgage of $50,000 on the property. To help pay for their child's college expenses, they have arranged for an equity loan on the home. Which of the following statements is correct?

The interest rate will probably be based on the prime rate plus a lenders margin of 1 to 3%

Graduated payment mortgage is appealing to which group of buyers?

young professionals

To qualify for a reverse mortgage a borrower must have reached the age of

62

Lenders must provide consumers with a historical example of how the actual changes in index values have affected payments on a $10,000 ARM as a result of

Regulation Z

When the holder of a mortgage agrees to except the position of lower lien priority, and to allow another mortgage to advance in priority, the process is known as

Subordination

A ceiling on how much the interest rate can increase on a loan for the adjustment period is called an interest rate

cap