fin 477 - ch 9 quiz

Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? one day 30 days 60 days 90 days

90 days

A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the: one-year U.S. Treasury constant maturity rate. prime rate. London Interbank Offered Rate (LIBOR). cost-of-funds index.

London Interbank Offered Rate (LIBOR).

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: a. Foreclosure is a costly process for all parties involved. b. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. c. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. d. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.

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

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? Federal Housing Administration (FHA) loan Veterans Affairs (VA) loan conventional home loan an assumable home loan

conventional home loan

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: a. Legal costs should be lower with a short sale than with foreclosure. b. A short sale usually enables a better sale price and a faster sale than foreclosure. c. 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. d. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

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

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? yield-maintenance prepayment penalties prepayment lockout defeasance prepayment penalty curtailment penalty

defeasance prepayment penalty

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce 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. statutory redemption. strategic default. substantive default

equity of redemption.

Which of the following loan clauses releases the borrower from liability for fulfillment of the mortgage loan contract? demand clause insurance clause escrow clause exculpatory clause

exculpatory clause

The market determined interest rate that is the "moving part" in an adjustable rate mortgage is more commonly referred to as the: teaser rate. margin. index rate. cap rate.

index rate.

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? defeasance yield maintenance provision demand clause lockout provision

lockout provision

Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: fully amortizing. partially amortizing. nonamortizing. negatively amortizing.

negatively amortizing.

In a mortgage loan agreement, the financial rights and obligations of borrower and lender are detailed in the: mortgage (Deed of Trust). listing contract. note. assignment of mortgage.

note.

In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: rescinding. redlining. assuming. holdout.

redlining.

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce 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: equity of redemption. statutory redemption. strategic default. substantive default.

statutory redemption.

It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? offer acceptance possession of the property passes to the buyer title to the property passes to the buyer

title to the property passes to the buyer