FINANCING III
Bob purchase and existing loan from a lender for $13,500. At the time he purchased the loan it had just been created and had a loan balance of $15000. The borrower never made a payment on the loan and bob decided to foreclose. What is that maximum amount that Bob can foreclose for?
$15000. When a loan is discounted, the loan amount doe not change. Bob can foreclose for the full mount of the loan.
The actual fees are $459 on a $8000 first trust deed with a loan term of 2 years. Under Article 7, the maximum that the broker can charge is:
$400. Article 7 states that the costs and expenses cannot except 5% of the loan or $390, which eve is greater. In no event can the fee exceed $700. %5 of the principal, $8000, is $400. The broker cannot charge $459 because $400 is the maximum amount that can be charged.
The maximum commission a loan broker may charge to negotiate a $4000 hard money 2nd trust deed, due in 3 years is:
15%. Loan broker law.
TILA as modified by the Mortgage Disclosure Improvement Act, requires a waiting period prior to consummation of a transaction. How long is the waiting period?
7 business days from the mailing or delivery of the TIL Statement to the consumer. MDIA requires a seven business day waiting period prior to consummation from delivery or mailing of the TIL statement to the consumer prior to consummation. This timing begins when a creditor mails or otherwise delivers the TIL Statement to the consumer. It is not based on receipt date or assumed receipt date by the consumer but rather mailing or delivery by the creditor.
Mr. Noro bought a property using a purchase money trust deed. A few years later he sold the property to Ms. Hassen for all cash. Which of the following would not be disclosed by the public records?
A reconveyance deed to Ms. Hassen. Since Ms. Hassen paid all cash for the property, there would be no need for a reconveyance deed to Ms. Hassen. Therefore it would not appear on public records.
Broker Baker negotiates a hard money second trust deed for Paul in the account of $7500 with a 5 year term. Baker charges Paul $2500 commission for his service. Which of the following is a correct statement as to this transaction?
Broker Baker can only collect the legal commission of 15%which is $1,125. A real estate broker negotiating loans subject to the Real Property Loan Law, Article 7, is limited by law in the amount that may be charged as commission. The maximum commission that the broker could charge for a $7500 second trust deed with a 5 year term would be 15%.
Which agency hold the deed on a Cal Vet loan?
Department of Veterans Affairs.
In a promissory note and mortgage signed by two or more co-borrower, when one of the co-borrowers defaults, what is the liability?
Each is jointly and severally liable. Each of the co-borrowers on a loan will be held jointly and severally liable.
Which type of government financing insures lenders against loss?
FHA. The FHA insures lenders against loss; the VA guarantees lenders against loss.
The least complicated loan to assume would be:
FHA. There are two federal agencies and one state agency that help make it possible for people to buy homes they would never be able to purchase without government involvement, the FHA and the VA and the Cal Vet loans. Ease of assumption by the FHA is described in Loans chapter.
Notes are said to be negotiable and non-negotiable. Which of the following best defines a negotiable note?
If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. The maker signs a note and the payee endorses it.
Under the California Veterans Farm Home Purchase Plan, the purchaser would initially receive which of the following?
Land contract. CalVet sells on land contract, state retains title as a security device.
Mr. Dunn purchased his home from Mr. Spring using seller carry back financing. Later Mr. Kirk bought the property subject to the loan. If Mr. Kirk immediately defaulted, Mr. Spring:
May not get a deficiency judgment because it was a purchase money loan.
Mortgage markets are classified as primary and secondary markets. Of the following statements concerning these markets, which is correct?
Mortgage companies are primarily engaged in the primary market. Primary mortgage market deals with loans directly to the original borrower. Secondary mortgage market deals with the paper, deed of trust and mortgages, being bought and sold in the open market.
Which of the following loans would not be insured by FHA or guaranteed by the DVA?
Private lenders. Only qualified lending institutions are eligible for FHA insurance or VA guarantee.
What type of property is included in a package loan?
Real property and personal property. Both real and personal property may be used as collateral.
Doug is a homeowner who has failed to make payments on a trust deed for two months. The trustee has recorded a notice of default. What does Doug have?
Right of reinstatement. The trustor has the right to reinstate the loan until five days before the trustee sale.
CRV is a common phrase used in the financing of real estate. CRV is issued by the:
Veteran's Administration. Certificate of Reasonable Value is the VA appraisal.
When purchasing a property under the California Farm and Home Purchase Act, would it be possible to obtain secondary financing at the time of purchase?
Yes, secondary financing is allowed at the time of purchase and all during the loan period.
A hard money loan is considered to be:
a loan from a commercial lender wherein the proceeds are credited to the borrower in cash. The definition of a hard money loan is the actual deliverance of cash to the borrower by the lender.
A hard money loan is:
a loan of cash to an existing owner of real property to buy an automobile Hard money loans are given to existing owners of real property for any purpose other than buying real property. Usually considered a personal loan.
A hard money loan is:
a loan of cash to an existing owner of real property to buy an automobile. Hard money loans are given to existing owners of real property for any purpose other than buying real property. Usually considered a personal loan.
What is a junior loan?
a loan recorded after a first deed of trust or mortgage. Any deed of trust or mortgage that is recorded after a first deed of trust or mortgage is a junior loan. It has less priority than those recorded before it is recorded.
A promissory note which provides for the payment of interest only during the length of the note is:
a straight note. a straight note is a promissory note in which payments of interest only are made periodically during the term of the note - with one principal payment due upon maturity.
What is the maximum loan available on a VA loan?
amount on CRV. Means Certificate of Reasonable Value. This is the appraised value.
Under a land contract of a conditional contract of sale, the seller would not normally initiate a legal action based on:
an agreement not to records. the right to record is protected by law and an agreement to give it away in unenforceable.
When a lender accepts a deed in lieu of foreclosure, the lender:
assumes junior loans. When a lender accepts a deed in lieu of foreclosure, the lender assumes all junior liens against the property.
You, as an agent, have sold a home for which you negotiated a first loan with a bank and a second loan to be taken back by the seller. You have been requested to record a Request for Notice. This is usually to protect:
beneficiary of the second loan. The purpose of a Request for Notice is if the trustor defaults on the first loan the trustee of the first loan must notify the beneficiary, lender, of the second loan of the trustor's default.
Who benefits the most from the issuance of a notice of default on a second deed of trust?
beneficiary. The holder of a second deed of trust, beneficiary, when notified of a default, may take steps necessary to protect his investment, second deed of trust.
A loan covering several properties secured by a mortgage or deed of trust is a:
blanket loan. A blanket loan is a loan that covers more than one parcel and is secured by a mortgage or deed of trust, usually with a release clause.
The primary mortgage marker is the market in which lenders make mortgage loans directly to:
borrowers the primary mortgage market is the market in which lenders make mortgage loans by lending directly to borrowers.
The Federal National Mortgage Association was created under Title III of the National Housing Act for the purpose of:
buying title 2 loans when the bank will not. Fannie Mae was created to stabilize the mortgage market.
Most construction loans are made by:
commercial banks. Savings and loan associations prefer home loans. Life insurance companies prefer commercial loans.
Which of the following courses of action would the Federal Reserve Board take during an elongated period of "tight money"? a. any of the following. b. purchasing large blocks of government bonds. c. lower the reserve requirements of bank members. d. decrease the discount rate for bank member.
correct answer is a. any of the following. They are all courses of action taken by the federal reserve board to help alleviate tight money conditions in the country
Which of the following is not a negotiable instrument? a. promissory note. b. security instrument. c. installment note. d. personal check.
correct answer is b. security instrument. To be negotiable, a document must be a promise to pay - choices a., c. and d. The security instrument, mortgage or deed of trust, is only the security for the promise to pay.
A client contacts you to give you a listing. You look at his papers and discover that he is purchasing the property on a contract of sale. The contract contains no acceleration clause and there are no restriction in the contract of sale prohibiting re-assignment. One of the following is the most nearly correct statement. Your client could: a. sell his interest in the property but only after first paying off the existing contract of sale. b. sell or assign his rights but not his duties without approval of the contract seller. c. properly give a warranty deed to the property to the purchaser providing the deed recited "subject to the existing contract of sale" d. properly give a grant deed to the property to the purchaser.
correct answer is b. sell or assign his rights but not his duties without approval of the contract seller. In a. he can sell his interest without paying off the existing contract. In c. and d. he cannot give a deed of any kind because, as the "equitable owner" only he has no title to convey.
A purchase under a sale leaseback transaction would be least interested in: a. location of the property. b. the seller's depreciated book value. c. general well-constructed building. d. the credit of the prospective seller.
correct answer is b. the seller's depreciated book value. He would probably be somewhat interested in all of these but least interested in depreciated book value.
Which of the following does not belong? a. VA. b. Cal Vet. c. Conventional. d. FHA 1
correct answer is d. FHA 1. FHA 1 cannot be used for the purchase of a home. Its primary function is for remodeling or alterations to existing improvements.
Article 7 of the Real Estate Law provides that interest on a loan may not be charged: a. prior to the date of the note. b. until the proceeds of the loan have been made available to the borrower. c. until the proceeds of the loan have been deposited in escrow. d. all of the above are requirements of Article 7.
correct answer is d. all of the above are requirements of Article 7. Review these requirements of Article 7 concerning when interest may begin on a loan.
Which of the following courses of action would the Federal Reserve Board take during an elongated period of tight money? a. decrease the discount rate for bank member. b. purchase large blocks of government bonds. c. lower the reserve requirements of bank members. d. any of the above.
correct answer is d. any of the above.
Assume that a property was sold for $20,000 and the buyer assumed the existing first trust deed and note of $8000, the existing second trust deed of $4000 and executed a new, third trust deed and note in favor of seller for $2000. Shortly after the purchase, payments were not made on either the second trust deed or the third trust deed and the beneficiary of the second trust deed recorded a notice of default and sent a copy to the seller. Upon receipt of the notice, the seller could take action and obtain: a. a judgment. b. an attachment. c. a lien. d. none of the above.
correct answer is d. none of the above. The seller already has a lien with his trust deed and note. Since he cannot obtain an attachment nor a judgement, this is a purchase money trust deed, the answer is "none of the above."
It is said real estate has its own language. All of the following terms are closely related except: a. alienation clause. b. hypothecation. c. third deed of trust. d. tenants in common.
correct answer is d. tenants in common. The other answers all relate to security instruments in real estate. Tenants in common is a method of title vesting.
In making an offer to purchase Lincoln's property, the Sherman's insert the following clause, "Purchase price to be $100,000. Offer conditioned upon buyers obtaining a VA loan to be secured by the property in the amount of $100,000 for 30 years payable approximately $805 per monty including interest at 9% per annum plus taxes and insurance." Which of the following most nearly represents the buyers' possibilities in this purchase transaction? a. if the $100,000 loan cannot be obtained, the buyers may require a return of their deposit and cancel the transaction. b. If the $100,000 loan cannot be obtained, the parties may renegotiate the terms of the purchase if mutually agreeable. c. if the maximum loan obtainable on the property is $90,000, the buyers could complete the purchase by making a $10,000 cash down payment. d. the buyer may choose any of the above options.
correct answer is d. the buyer may choose any of the above options.
A deed of trust is the most common method of financing the purchase of real property in California. All of the following are correct statements concerning a trust deed except: a. the chief purpose of a trust deed is to create a lien. b. a trust deed may be foreclosed without court action or approval. c. a trust deed has no redemption period. d. the promissory note is held by the beneficiary as his prime security for the loan.
correct answer is d. the promissory note is held by the beneficiary as his prime security for the loan. The trust deed is held by the beneficiary as prime security for the loan. The promissory note is security for nothing.
What would determine the priority of a mortgage?
date of recording. Since all mortgages appear on the surface to be the same in wording, the distinguishing mark would be the county recorder's stamp in the right hand corner as to the exact time of recording. In other words, first one to record is the right one in right.
Anyone who sells a promissory note for less than its value is:
discounting a note. A loan is discounted whenever it is sold for less that the face amount or current loan balance.
The process of depositors removing funds from savings is called:
disintermediation. Depositors remove their funds form savings and put it into investments that pay a higher rate of interest.
Subprime loans:
do not qualify for sale to Fannie Mae or Freddie Mac. Also, these loans will not be guaranteed by GNMA. Conventional lenders at one time chose not to participate in these loans, but are participating now due to the higher interest rates on these loans. Many loans are from low down payment mortgages for buyers with poor credit.
The terms blank, restricted and qualified refer to:
endorsements. Signing the owner's name on the reverse side of a negotiable instrument such as a check or promissory note is a method of transferring title and is called an endorsement. A blank endorsement guarantees payment to subsequent holders of the note or check . In insurance policies, a restricted endorsement acknowledges the policy coverage. In FHA loans, a qualified endorsement will indicate that the loan is insured under the National Housing Act.
Payments of FHA loans are:
equalized. FHA loans are fully amortized over the life of the loan, which means that each payment goes to reduce the principal until it is fully paid off without a balloon payment. Since each payment includes interest the total payments are calculated to be the same equalized each month.
In checking trust deed documents in the county recorder's office, you will find that the recorded deed of trust refers to standard clauses contained in a previously recorded deed of trust. This previously recorded trust deed is known as a:
fictitious deed of trust. Nearly all deeds of trust used by banks, escrow and title companies are the short form. This merely recites the trustor's name, the trustee, describes the property and has a place or signature. The terms of the trust deed are not printed in the short form but refer to an original deed of trust recorded in each county and it is identified as a fictitious deed of trust. This lists all the terms and conditions in detail.
A first deed of trust has a clause in it referring to a previously recorded instrument; that instrument would be a:
fictitious deed of trust. A fictitious deed of trust refers to the part of a deed of trust that may list restrictions, clauses, etc. but to save recording costs for the many pages that might exist, are simply referred to in the recorded deed of trust as part of the original document, but not part of the recordation.
Mr. Small sells his house for $10,000 and takes back a trust deed and note for $5,000. Needing cash, he immediately sells the trust deed and note at a discount to Mr. Big for $3,500, assigning the trust deed and endorsing the note "without recourse." If trustor defaults before making any principal payments, disregarding costs of collection, by which method could buyer of the first trust deed get the greatest amount in the shortest period of time?
foreclosure by trustee's sale to recover $5000. The fact that Mr. Smith sold this purchase money encumbrance at a discount in order to obtain ready cash does not change the face value of the note.
A broker negotiated a hard money $4000 not secured by a second deed of trust with a term of 4 years for a client. Considering the above transactions, which of the following is a correct statement?
his maximum legal commission would be $600. Commission allowed on a note for less that $20,000, secured by a second deed of trust for a term of 4 years is 15%. 15% of $4000 is $600.
The largest loans would most likely be made by an:
insurance company. Commercial loans, which are usually the largest loans, are usually made by an insurance company.
in real estate financing, lenders will sometimes find it necessary to refer to "nominal rate," when granting loan. This means.
it is the rate of interest specified in the promissory note. The word nominal stems from the word name and is the rate named in the note.
A holder in due course would be successful against a defense of:
lack of consideration to the maker. Lack of consideration to the maker is considered a "personal defense" which is not good against a holder in due course.
An impound account on a loan benefits the:
lender. Impound, escrow, accounts are to protect the lender and the property. Their purpose is to insure the lender that the property taxes and insurance will be paid.
Who benefits from a prepayment penalty?
lender. The prepayment penalty is required because of the loss of projected long term interest income to the lender from the term of the loan.
A man bought a home for $160,000 and paid $16,000 down. Later, the value of the property rose to $170,000. This is an example of:
leverage. Leverage is the use of borrowed funds, with anticipation of increase in value to produce a profit on your own money and the borrowed funds.
In real estate financing, reference is sometimes made to take out loans. This refers to:
long term loan taken out after construction. A take out loan is the long term financing that replaces the interim construction loan. It "takes" the construction lender "out" of the financing picture.
In real estate financing, reference is sometimes made to take out loans. This refers to:
long term loans taken out after construction. A takeout loan is the long term financing that replaces the interim construction loan. It takes the construction lender our of the financing picture.
When a trust deed is sold, the parties use an escrow in order to:
make sure that conditions and terms are met prior to the settlement of the transaction. The purpose of an escrow is to make sure that conditions and terms are met prior to the completion of the transaction.
In the course of offering a note for resale, Mr. Kim, an investor, explains that the note contains an alienation clause. This one fact would:
make the note more negotiable. If an investor buys a note that contains an alienation clause and the property resold, the balance due on that loan is immediately due and payable to the investor. This fact tends to make a note more negotiable.
For a credit transaction in which the security interest is a consumer's principal residence, the consumer can exercise his or her right to rescind the transaction until:
midnight of the 3rd business day following consummation.
The lender under a mortgage is called.
morgagee. mortgagee is the lender under a mortgage.
Of the following, a primary source of fund for residential financing is:
mortgage companies. By far, one of the largest sources.
Which security instrument is most valuable to a buyer who may fall on temporary hard times or default on payments?
mortgage. A mortgage would give the buyer more time to redeem himself.
The person who loans money secured by a mortgage on a parcel of real property is called a:
mortgagee. The mortgagee is the lender, the mortgagor is the borrower in a mortgage.
A fast rule of thumb way for mortgage companies to figure out the monthly interest payment on loans at 7.2% interest would be:
multiply the principal by 0.006. Divide 7.2% by 12 months to determine the interest rate for 1 month, which is .006. Then the monthly interest rate can be applied to the principal, loan amount.
A check is a:
negotiable instrument. a negotiable instrument is a written unconditional promise or order to pay a certain amount of money at a definite time or on demand.
How many points is a buyer/borrower limited to paying on FHA Loans?
no limitation. FHA loan points can be negotiated between buyer and seller.
Who would pay the points on a cal vet loan?
no one there are no points on a cal vet loan.
Mortgage and deeds of trust are considered:
personal property. a "chattels real" is a lease.
A man sold a lot for $25,000 and took back a note for $9000. He is now in need of some cash and wants to use the note as security for a loan with the bank. This type of loan transaction would be known as:
pledge agreement. Using personal property, the note, as security for a loan is considered a pledge, similar to the pawn broker's holding the property for loan security.
A release clause in a mortgage allows:
portions of the security to be released from a mortgage lien when multiple properties are being used to secure the loan. A release clause in the mortgage allows some of the properties to be released from a blanket encumbrance when part of the debt is paid.
All of the following instruments are commonly recorded, except:
promissory note. Instruments are formal legal documents such as contract, mortgage or lien, deeds, or wills which are relied on as the basis, proof or support of anything else. A promissory note is evidence of a debt.
When money is said to be tight, which of the following would provide the best form of investment?
real property security instruments. When the money market is tight, interest rates on mortgages and deeds of trust tend to increase drastically; therefore, they would be a good form of investment during a tight money market.
Of the following, the largest number of home loans are made by:
savings banks. Currently savings banks are the largest single resource for residential mortgage credit.
What is the document commonly used to secure a loan on personal property?
security agreement. A security agreement is the document commonly used to secure a loan on a personal property, much as a mortgage secures a loan on real property.
There are many differences between mortgages and deeds of trust. All of the following are differences, except the:
security for the loan. In both mortgages and deeds of trust, the real property is the underlying security for the loan.
If compensation is paid to a short sale negotiator or broker, the compensation:
should be disclosed to all parties in the purchase agreements, the escrow instruction and the HUD1 closing statement. If compensation is paid to a short sale negotiator or broker, to ensure that there is no confusion, mystery or lack of transparency with respect to such fees, the compensation should be disclosed to all parties in writing bit in the purchase agreements and in the escrow instructions, and the fees must be properly documented in the appropriate line item(s0 in the HUD 1 clsoing statement.
A note payable interest only is called a:
straight note. a straight note is a note which requires no principal payments during the life of the loan.
Subordinate is most opposite to:
superior. Subordinated loan will come second. Opposite would be superior or first.
A loan originator is an individual who:
takes a residential mortgage loan application. Section 1503 of the SAFE Act defines "loan originator" as "an individual who 1. takes a residential mortgage loan application and 2. offers or negotiates terms of a residential mortgage loan for compensation or gain.
What is a swing loan?
temporary equity loan. A swing loan is a short term loan used while a seller is waiting for his or her home to sell, but must close an escrow on the next home.
A man purchased a residence for $125,000. He deposited $115,000 cash and a note secured by a deed of trust for the balance of the purchase price. Three years after the closure of escrow he executed a second deed of trust on the property to secure a loan he used to purchase an automobile. Considering the above facts, which is a correct statement?
the beneficiary of the first trust deed may foreclose in the event of default but has no recourse to a suit for a deficiency. The second deed of trust is on a hard money loan and may therefore get a deficiency judgment. The first trust deed is on a purchase money loan and therefore may not get a deficiency judgment.
What provided the most important protection for a lender on a junior loan?
the borrower's equity in the property. the borrower's equity in the property is the most important concern to a lender making a junior loan.
A clause in a security instrument that declares the total unpaid balance due and payable upon default is called:
the correct answer is d. none of the above. A clause in a security instrument, mortgage or deed of trust, that declares the total unpaid balance due and payable upon default is called an acceleration loan.
Joe wants to expand his business and plans to purchase a piece of industrial property He applied for a loan to help purchase the property The lender is most interested in
the financial condition and credit standing of the individual or company applying for the loan.
Considering construction financing, the lender will usually release the final payment to the borrower when:
the lien period has expired. Lenders usually withhold the last 10% of the loan until the lien period has expired, thereby protecting themselves to a degree if a mechanic's lien foreclosure sale were instituted.
A reconveyance deed is an instrument used daily in the real estate profession. These deeds are signed and executed by the:
trustee. The trustee signs and records a deed of reconveyance to show the debt has been repaid and to clear the lien fro the property.
The right or power to sell property in the even of default under the terms of the deed of trust are given by:
trustor to trustee. the trustor, borrower, gives the trustee the power to sell the property in the event of default.
Which of the following is the borrower on a promissory note secured by a deed of trust?
trustor. the trustor signs the deed of trust.
The power of sale is given to the trustee by the:
trustor. Borrower, trustor, irrevocably grants and conveys to trustee, in trust with power of sale, the property in the even of default by the borrower.
Who benefits from a subordination clause in a deed of trust?
trustor. the subordination allows the trustor to subsequently borrow money on the property giving a first deed of trust as security for the loan, the previous trust deed then being subordinated to second position.
The maximum FHA and VA loan amounts:
vary in different regions of the country. The FHA maximum loan amounts vary from one county to another. VA maximum loan amounts also vary from on region to another because they are determined by a Certificate of Reasonable Value, an appraisal of reasonable value for the property in the area in which it is locate.
In dealing with a sale with a land contract subject to a blanket encumbrance containing a release clause, funds are deposited in an account approved by the Real Estate Commissioner for the protection of:
vendee. The funds are impounded to protect the purchaser under the contract. Purchaser to vendee
In dealing with a sale with a land contract subject to a blanket encumbrance containing a release clause, funds are deposited in an account approved by the Real Estate Commissioner for the protection of:
vendee. The funds are impounded to protect the purchaser under the contract. Purchaser to vendee.
All of the following are parties to a deed of trust, except:
vendee. There are three parties to a deed of trust: 1. the borrower, trustor. 2. the lender, beneficiary 3. a neutral third party called a trustee.
