Financing

deed of trust

An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary) and reconveyed upon payment in full.

The seller must have $140k to pay off a mortgage, $15,000 for a vacation, $15,000 in closing costs, and the broker fee of seven percent. How much must the property sell for?

$182,795.70 First add up everything the seller wants, 140k + 15k + 15k = 170k. Out of 100 percent the seller promised the broker 7%. The sellers share of 100% is 93%. 170k / .93 = $182,795.70

If an investor wants a 9 percent rate of return on his investment, how much income will the property have to generate to justify a price of $980000?

$88,200 The whole is the total sale price of $980000 x the rate of return 9% = $88,200

certificate of title

(also known as an opinion letter) states that the title is vested in a particular individual.

Blanket Mortgage

A mortgage which covers more than one piece of real estate. Often used by a developer in the financing of undeveloped lots. Contains a partial release clause.

Title Theory State

A state where the mortgage lender has title to the property until the debt is repaid

Property is attached in order to

provide security for payment of a debt or judgement Attachment is the court-ordered seizure of property to provide security for payment of a debt

The type of lender with the greatest percentage of assets invested in residential mortgages is a

savings and loan A savings & loan is the most invested. The premise of a savings & loan is to take the deposits in savings accounts and use them to make loans for depositors.

A metes and bounds legal description

starts at a beginning point and a description of the property's boundaries and returns to the point of beginning

Debt Service

the amount of money paid in regular intervals to reduce the balance owed on a debt

RESPA requirements would NOT apply in which situation?

the conventional loan will not be sold on secondary mortgage markets

Assignment

the giving of a persons rights and interests under contract to someone else

deficiency judgement

the mortgage debt that remains due and payable by the borrower after sheriff's sale of property from a foreclosure sale

Deficiency Judgment

the mortgage debt that remains due and payable by the borrower after the share or sale of property. The judgment is actually for the full amount of the unpaid mortgage debt, but the foreclosure sale proceeds are deducted from the amount due

VA uses

the residual income method in lieu of the housing expense ratio. Residual income is what the veteran has left after paying taxes and housing expenses.

A type of financing available for real estate mortgages in which the percentage interest rate will differ from year to year according to terms specified by the lender is known as a(n)

adjustable rate mortgage

Statutory redemption

allows the mortgagor to repurchase the foreclosed property after the foreclosure sale

The term "debt service" refers to the

amount of money paid in regular intervals to reduce the balance owed on debt

Each January, a homeowner receives an estoppel certificate from his bank indicating the

amount of principal remaining on the mortgage

The seizing of property by court order as security for a debt or judgment is known as

attachment

Under the Fair Credit Reporting act

borrowers have the right to know who receives a copy, have a copy and dispute inaccuracies in their credit reports

Under the Fair Credit Reporting Act,

borrowers have the right to know who receives a copy, have a copy, and dispute inaccuracies in their credit reports.

Estoppel Certificate

certificate of no defense, is a legal instrument used by a bank to stop the mortgage on a certain date where the homeowner agrees that the mortgage balance is correct, after which the homeowner has no defense to contest the amount shown still due and owing.

The primary function of the secondary mortgage market includes all of the following except

make loans directly to the public these are the private investors and government agencies that both buy and sell real estate mortgages

Which class is protected under the Equal Credit Opportunity Act but is NOT protected under the Federal Fair Housing Act?

marital status

the equal credit opportunity act protects against

marital status discrimination

In a foreclosure sale, the debtor

may be a successful bidder and be awarded the title to the property

A lender advertises that there are reasonable monthly terms available for the purchase of a home. Which disclosure is necessary?

no disclosure is necessary

While both the mortgage deed and the mortgage note are signed by the borrower, the note is

not recorded The mortgage deed is recorded to create the lien on the property. The mortgage note is the personal promissory note that is retained by the bank. It is not signed in duplicate, as this would create two debts, which could both be called by the bank.

Regulation Z

of the Truth-in-Lending Act requires that a lender disclose all costs of obtaining a loan, including: Interest rate, costs of payments over the life of the loan, etc.

Hypothecation clause

pledges the property as security to a third party. pledges the real property to be collateral for debt

Discount points are calculated on the

loan amount

How many acres in the lot described as the NW 1/4; of the SW 1/4; of the SE 1/4;?

10 640 / 4/ 4/ 4 = 10

If a property generates a gross rent income of 200,000 and a sales price of 3,000,000. What is the gross rent multiplier?

15 Sales Price / Rent = Gross rent multiplier $3,000,000 / 200,000 = 15

A lender charges three discount points on a loan. The buyer is buying a $100,000 home and is getting an 80% mortgage. How much in discount points would the borrower be required to pay?

2,400 Discount points are calculated on the loan amount, not the sale price. An 80% loan of a $100,000 house is $80,000. Each discount point is 1% of the loan amount, thus the points would be computed as follows: $80,000.00 x 3% (0.03) = $2,400.

Square feet in an acre

43,560

If a lender is charging a borrower an interest rate of 5% and also charging the borrower two points, what is the lender's yield?

5.25% The lender's yield is the rate of interest plus points: 5% + 0.25% (two points) =5.25%. When calculating points for the exam, remember that it takes 8 points to equal 1% of interest (1% / 8 points = 0.125% per point; 2 points x 0.125% = 0.25%).

how many square feet are in a yard?

9

General Warranty Deed

A deed in which the grantor fully warrants good, clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.

Deed of Trust

A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two. The third party holds naked title for the benefit of the lender. Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party)

Quitclaim Deed

A deed to relinquish any interest in property which the grantor may have, without any warranty of title or interest.

Discount Points

A fee charged by the lender at settlement that results in increasing the lender's effective yield on the money borrowed. One discount point equals one percent of the loan amount.

term loan

A loan, generally obtained from a bank or insurance company, on which the borrower agrees to make a series of payments consisting of interest and principal.

Equitable Redemption

Before foreclosure the mortgagor (borrower) has a right to reclaim the property forfeited due to mortgage default.

Limited Warranty Deed

Deed in which the grantor warrants title only against defects arising during the time he owned the property and not against defects arising before that time of ownership. Special Warranty Deed.

All of the following statutes require the disclosure of closing costs except:

FCRA FCRA is the Fair Credit Reporting Act which regulates the collection of credit information.

The Truth-in-Lending Act requires that the buyer be given a

Loan Estimate of the cost of interest, loan payments, etc., and does not require that the mortgage be recorded.

PITI

Principal, Interest, Taxes, Insurance

Alienation Clause (Due on Sale Clause)

Says you must repay your mortgage if you sell your home to a new owner (loan is not assumable)

certificate of sale

The document given to the individual who successfully bids and purchases a property at a Sheriff's Sale. It does not convey title to the property.

Disintermediation

The movement of money out of a savings account into a higher-yield investment (such as corporate and government instruments)

The seller in a purchase money mortgage is not bound by

Truth-in-Lending laws, which require disclosure of APR, finance fees, and discount points from lenders only.

Deed in Lieu of Foreclosure

Used by the mortgagor (borrower) who is in default to give the property to the mortgagee (lender) in order to eliminate the need for a foreclosure.

A G.I. loan is the same as a(n) _____ loan.

VA A G.I. loan, often referred to as a soldier's loan, is guaranteed by the Veterans Administration.

land installment contract

a contract for the purchase of property based on the "installment" payment plan. The buyer will receive the deed only when the purchase price has been paid in full.

Usury

a lender who charges more than the statutory limit of interest

Interim financing used during construction of a building, followed by long-term financing is called a(n)

construction loan Construction loans are sometimes called "take out" loans. Loan proceeds are distributed in installment payments as completion of the improvements occur.

A real estate firm has an in-house title company, mortgage broker, and home inspection company under one business entity. This is allowable only if

control business arrangements are clearly disclosed to the consumer and is aware that other providers are available

Which loan is NOT guaranteed or insured by a government agency?

conventional

A mortgage is recorded to

create a valid lien

Wraparound Mortgage

created when two separate mortgages are wrapped into one and combined at a new interest rate

RESPA regulations apply only to loans

financed by federally-related mortgage loans (i.e., FHA or VA) or loans intended to be sold by the lender on the secondary mortgage market

Assumption

involves the taking or receiving of another persons rights and obligations in a pre-existing contract

Control Business Arrangement (CBA)

is legal as long as

RESPA prohibits:

lender from receiving secret profits or kickbacks from service providers