Chapter 6 - Instruments of Real Estate Finance

How many parties are included in a deed of trust...? 1 2 3 4

3

A promissory note includes which of the following...? A All of the above B Effective date of contract C List of collateral D Amount of debt

A All of the above

Which of the following estate offers the right of possession and control, but not title...? A Leasehold Estate B Fee Simple Estate C Life Estate D All of the above

A Leasehold Estate

According to lien theory, the lender retains equitable rights to the property, while the borrower retains...? A Legal rights B Encumbrance rights C Land rights D Foreclosure rights

A Legal rights

Land Contract

A contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid.

Lien

A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation (ex: judgments, taxes, mortgages, deeds of trust, etc..).

Life Estate

A freehold estate created for the duration of the life or lives of certain named persons; a non-inheritable estate.

Mortgage Lien

A legal claim against a mortgaged property, which must be paid when the property is sold.

Judgment Lien

A legal claim on all of the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment.

Involuntary Lien

A lien imposed against property without consent of an owner (ex: taxes, special assessments, federal income tax liens, etc..).

General Lien

A lien on all the property of a debtor.

Specific Lien

A lien that attaches to one specific property only.

Vendee

A purchaser, buyer.

Encumbrance

A right or interest in a property that is used by someone other than the owner.

Vendor

A seller.

Release Clause

A stipulation that upon the payment of a specific sum of money to the holder of a trust deed or mortgage, the lien of the instrument as to a specifically described lot or area shall be removed from the blanket lien on the whole area involved.

The standard provisions of a mortgage incudes which of the following...? Recording information Note of attachment Granting clause All of the above

All of the above

Due on Sale Clause

An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

Mortgage

An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; a procedure for foreclosure in event of default is established by statute.

Encroachment

An unlawful intrusion onto another's adjacent property by improvements to real property (ex: a swimming pool built across a property line).

Voluntary Lien

Any lien placed on property with consent of, or as a result of, the voluntary act of the owner.

Andrew obtained a loan from a local bank to purchase a new house. Under the deed of trust system, Andrew's bank is the...? Beneficiary Grantor Trustor Trustee

Beneficiary

This is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan...? Deed of trust Promissory note Deed Legal note

Deed of trust

An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property is known as a...? Due on sale clause Prepayment clause Subordination clause Release clause

Due on sale clause

A right, privilege or interest limited to a specific purpose which one party has in the land of another is known as a/an...? Encroachment Easement Lien Grant

Easement

An unlawful intrusion onto another's adjacent property by improvements to real property is known as a/an...? Encroachment Easement Lien Grant

Encroachment

Easement by Necessity

Exists when a landowner has no access to roads and is landlocked.

Which of the following refers to an absolute ownership of real property...? Leasehold Estate Life Estate Fee Simple Estate All of the above

Fee Simple Estate

Promissory Note

Following a loan commitment from the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment. The evidence of the debt.

A contract for deed is also known as a...? Deed of trust Land contract Deed Mortgage

Land contract

Which of the following is a non-freehold estate...? Leasehold Estate Life Estate Fee Simple Estate All of the above

Leasehold Estate

This is a form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation...? Lien Encroachment Easement Grant

Lien

An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation is known as a...? Contract for deed Deed Mortgage Promissory note

Mortgage

This is a legal claim against a mortgaged property, which must be paid when the property is sold...? General lien Mechanic's lien Mortgage lien Tax lien

Mortgage lien

Trustor

One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust.

Trustee

One who holds property in trust for another to secure the performance of an obligation. Third party under a deed of trust.

The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity is known as a...? Closing fee Release of loan penalty Prepayment penalty Satisfaction fee

Prepayment penalty

This refers to a stipulation that upon the payment of a specific sum of money to the holder of a trust deed or mortgage, the lien of the instrument as to a specifically described lot or area shall be removed from the blanket lien on the whole area involved...? Due on sale clause Prepayment clause Subordination clause Release clause

Release clause

A home equity line of credit is typically ..............to a first mortgage? Inferior Prime Superior Subordinate

Subordinate

A mortgage is a secured note...? T (True) F (False)

T (True)

Subordinate loans are riskier than first mortgages...? T (True) F (False)

T (True)

Prepayment Penalty

The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity.

Beneficiary

The lender on the security of a note and deed of trust.

Subordinate

To make subject to, junior or inferior to.

Credit card debt is considered...? Recorded debt Open debt Secured debt Unsecured debt

Unsecured debt

The buyer is also known as the...? Grantor Trustee Vendee Vendor

Vendee

The seller is also known as the...? Grantee Trustor Vendee Vendor

Vendor

Any lien placed on property with consent of, or as a result of, the voluntary act of the owner, is known as a/an...? Judgement lien Involuntary lien Mechanic's lien Voluntary lien

Voluntary lien

A mortgage lien is an example of a...? A Specific lien B General lien C Involuntary lien D Judgement lien

A Specific lien

Which of the following liens takes top priority over other liens...? A Tax lien B Mortgage lien C Mechanic's liens D Judgement liens

A Tax lien

If a buyer assumes a seller's existing mortgage, who is responsible for the payments on the mortgage...? A The buyer B The seller C Both the buyer and seller D Neither the buyer or seller

A The buyer

Deed of Trust

A legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. It differs from the mortgage in a number of important respects. For example, instead of their being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

Easement

A right, privilege or interest limited to a specific purpose which one party has in the land of another.Encroachment

Fee Simple Estate

Absolute ownership of real property; a person has this type of estate where the person is entitled to the entire property with unconditional power of disposition during the person's life and descending to the person's heirs or distributees.

A right or interest in a property that is used by someone other than the owner is known as a/an...? Encumbrance Grant Judgement Act

Encumbrance

Which of the following is a freehold estate created for the duration of the life or lives of certain named persons...? Leasehold Estate Life Estate Fee Simple Estate All of the above

Life Estate

Which of the following liens often takes the highest priority...? General lien Mechanic's lien Mortgage lien Judgement lien

Mortgage lien

Leasehold Estate

Non-freehold estate; of limited duration, providing the right of possession and control but not title.

Which of the following establishes personal liability for the payment of a debt...? Deed Promissory note Trust Settlement statement

Promissory note

Junior financing loans are also referred to as a...? Prime mortgage Second mortgage Superior mortgage First mortgage

Second mortgage

Mark recently obtained a loan from a local bank to purchase a new house. Under the deed of trust system, Mark is the...? Beneficiary Grantor Trustor Trustee

Trustor