Chapter 9

Added to the index of the adjustable rate is a margin, which is the lender's markup. For standard adjustable rate mortgage (ARM) loans, the average industry margin has been stable at approximately

275 basis points

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled household?

Chapter 11 bankrupcy

The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business?

Chapter 11 bankruptcy

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of total claims?

Chapter 7 bankruptcy

In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing federal consumer financial protection laws; enforcing antidiscrimination laws in consumer finance; restricting unfair, deceptive, or abusive acts or practices; receiving consumer complaints; promoting financial education; and watching for emerging financial risks for consumers?

Dodd-Frank Wall Street Reform and Consumer Protection Act

Which of the following acts prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program?

Equal Credit Opportunity Act (ECOA)

Which of the following acts was passed out of concern for abusive predatory practices in subprime lending?

Home Ownership and Equity Protection Act (HOEPA)

A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the

Mortgage (Deed of Trust)

Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)?

Truth-in-Lending Act (TILA)

If a homeowner in mortgage distress owes more than the value of the home and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale except -legal costs should be lower with a short sale than with foreclosure -a short sale usually enables a better sale price and a faster sale than foreclosure -a short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner -a short sale relieves the seller of any other outstanding on the home, such as owner association fees or second mortgage

a short sale relieves the seller of any other outstanding on the home, such as owner association fees or second mortgage

In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage?

an unambiguous description of the property that is being pledged as collateral for the loan

Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause?

conventional home loan

When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursue a court-supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as

deed in lieu of foreclosure

For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off?

defeasance prepayment penalty

Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the

demand clause

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as he or she produces the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Georgia, this right only extends to the date of the foreclosure sale. When this occurs, this right is more commonly referred to as

equity of redemption ???

The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following?

lockout provision

In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e., the individual who receives the mortgage claim, is known as the

mortgagee

When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to

purchase the subject to the existing loan

With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as

recourse loans

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as he or she produces the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as

statutory redemption

Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true except -foreclosure is a costly process for all parties involved -only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property -when a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property -the net recovery by a lender from a foreclosed loan seldom exceeds 80% of the outstanding loan balance and commonly is much less than this amount

when a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property