Pre license Finance
"package" mortgage
A mortgage that includes both real and personal property
"chattel" mortgage.
A mortgage that only includes personal property
If unaccompanied by other facts, an advertisement under Truth-in-Lending may state A) "low downpayment." B) "$200 down." C) "6 1/2% interest." D) "$3,000 down."
A) "low downpayment." Regulation "Z" (Truth-in-Lending) requires creditors and arrangers of credit to disclose all terms of the loan if any specific terms (interest rate, downpayment amount or percentage, dollar amount of any finance charge, number of installments or period of repayment, or amount of any installment payment) are used. All terms of financing need not be disclosed if only the APR is used, or only general terms (low down, reasonable rate, etc.) are used.
According to the federal Truth-in-Lending Act, which of the following applicants for a $30,000 first loan must be told the annual percentage rate of the loan by the lending agency? I. An applicant for a residential loan. II. An applicant for a commercial loan. A) I only B) II only C) I and II D) Neither I nor II
A) I only Truth-in-Lending applies to loans made to individuals for personal, family, or household purposes. For personal property loans the law only applies if the loan does not exceed $25,000. For residential real property loans the law applies regardless of the loan amount. It does not apply to business, agricultural or commercial loans or loans made to partnerships, corporations, etc. The lender must disclose all finance charges
With certain restrictions, the federal tax laws permit deductions for mortgage interest on I. primary residences. II. second homes. III. rental property. A) I, II and III B) I only C) I and II D) III only
A) I, II and III Federal income tax laws allow deductions for mortgage interest as an expense of owning rental or investment property, and deductions of mortgage interest on primary and second homes up to certain specified limits.
Under Oregon law, land sale contracts in which the buyer has more than one year to pay the purchase price must be recorded I. by the buyer. II. by the seller. III. within 15 days from the effective date. A) II and III B) II only C) I and III D) I only
A) II and III If the seller accepted a purchase money mortgage, he would give a deed to the buyer immediately. If the seller uses a land sales contract he does not convey title until the contract is satisfied. State statute requires the land sale contract, or a memorandum of the contract, to be recorded by the vendor within 15 days of the effective date of the contract.
Under Oregon law, a residential trust deed I. may be subject to a deficiency judgment. II. means, among other things, that the grantor occupies the property encumbered by the trust deed as his primary residence. A) II only B) I and II C) Neither I nor II D) I only
A) II only A lender can obtain a deficiency judgment on a trust deed only if he forecloses through the court and the trust deed is not a residential trust deed (meaning the property is not used as the borrower's personal residence). In this case the property is his personal residence and the foreclosure is by advertisement and sale (trustee's sale), so there will be no deficiency judgment.
An investor would use which of the following as a hedge against inflation? A) Investment equity assets B) Mortgages C) Bonds D) Savings accounts
A) Investment equity assets "Equity assets" are assets in which the investor has equity in the item (e.g., real estate, art, stock, jewels, etc.), rather than having a creditor's interest in it (e.g., bonds, mortgages, etc.). In times of inflation, as dollars lose their value, the worth of a bond or mortgage decreases, as it will be repaid with dollars with less spending power.
In a mortgage the lender can establish which of the following? I. The right of redemption. II. The length of the redemption period. A) Neither I nor II B) I and II C) II only D) I only
A) Neither I nor II The right of redemption following a mortgage foreclosure is 180 days and established by state statute, not by the lender.
Douglas McCormick obtained a loan for his business from a banker by agreeing that 1% of the equity ownership would be conveyed to the bank and by also paying a 1/2% discount. This kind of loan is called A) a participation loan. B) an equity loan. C) ownership right. D) a wrap-around expansion loan.
A) a participation loan. A participation mortgage is a mortgage in which the lender participates in the income of the mortgaged property or receives a yield on the loan in addition to the interest rate, or takes an equity position in the ownership.
Curt and Betty Hamilton fell behind on the monthly payments due on their trust deed and note. The beneficiary is Robert Marshall, from whom the Hamiltons purchased the property. Marshall was the successful bidder on the property at the trustee's sale for the unpaid balance, turned in his note and received a deed from the trustee. The Hamiltons' right to cure the default A) ended 5 days prior to the trustee's sale. B) will continue for a period of 90 days after the trustee's sale. C) will continue for a period of 1 year after the trustee's sale. D) ended when they became delinquent in their payments.
A) ended 5 days prior to the trustee's sale. The right to reinstate the trust deed (the right to cure the default) ends 5 days prior to the trustee's sale
Cheryl Evans built a house and is selling it under a blanket encumbrance. Under normal procedure, she would request that the beneficiary arrange for her to get a A) partial reconveyance deed. B) warranty deed. C) grant deed. D) quitclaim deed
A) partial reconveyance deed. A blanket trust deed will normally have a partial reconveyance clause, allowing a portion of the property securing the lien to be released from the lien as the loan is paid off.
A property owner has a lot valued at $10,000. He purchases the adjacent lot, which is identical, for $10,000. Now the combined property is appraised at $30,000. This is an example of A) plottage. B) depth table. C) residual. D) capitalization.
A) plottage. "Plottage value" is the increased usability and value resulting from combining or consolidating adjacent lots into one larger lot.
Equitable title is transferred to a buyer upon the execution of which of the following documents? I. Mortgage II. Land sales contract III. Trust deed A) I only B) II only C) III only D) II and III
B) II only Mortgages and trust deeds do not convey any title. A land sales contract, also called an "agreement of sale," a "real property sales contract" and other similar names conveys equitable title to the purchaser.
Which of the following statements regarding priority of interests is TRUE? I. The date a mortgage is executed establishes the priority of that mortgage. II. The priority of a deed is established by the date the deed was recorded. A) I only B) II only C) Neither I nor II D) I and II
B) II only The priority of mortgages and deeds is based on the date of recordation, not on the date of execution (signing). A mortgage is called a "first mortgage" if it was recorded before another mortgage, regardless of the dates of the mortgages. The mortgage recorded afterward is called a "second" ("junior") mortgage
Carla Edwards obtained a mortgage loan in order to make repairs on her home. The mortgage is not insured or guaranteed by a government agency. The mortgage document secures the amount of the loan, as well as any future funds advanced to Edwards by the lender. Edwards has used a I. wrap-around mortgage. II. conventional open-end mortgage. A) I only B) II only C) I and II D) Neither I nor II
B) II only This is an open-end mortgage as it secures future funds advanced under the same mortgage. It is also a conventional loan as it is not insured or guaranteed by the government. Note, a mortgage is a piece of paper. The name given to it just describes certain features of the mortgage. For example, any mortgage not backed by a government agency is called a "conventional mortgage." If it includes as security for the loan two parcels or real property, it's a "conventional blanket mortgage." If it's also a first lien, it's a "conventional blanket first mortgage." If it also allows additional advances to be made, it's a "conventional blanket open-end first mortgage."
A mortgage differs from a trust deed in which of the following particulars? I. Possession II. Amortization III. Number of parties A) II and III B) III only C) I, II and III D) I only
B) III only Whether a mortgage or trust deed is used, the borrower will retain ownership and possession, the method of amortizing (paying off) the loan may be the same, and the document may be recorded to establish priority of interest. The documents do differ in that a mortgage involves a borrower (the mortgagor) and a lender (the mortgagee), while the trust deed involves a borrower (the grantor) and a lender (the beneficiary) and creates a neutral third party (trustee), to have the power to sell the property (without approval of a court), in the event the borrower defaults.
What is the name of the clause in a contract or note which allows the purchaser to make more than the stipulated payments? A) Contract of sale clause B) Or more clause C) Assignment clause D) Acceleration clause
B) Or more clause An "or more" clause allows the purchaser to pay more than the specified amount due without any penalty.
What kind of mortgage loan allows the interest thereon to be increased or decreased for certain reasons? A) Fluctuating B) Variable C) Escalation D) Alienation
B) Variable
Multiple Choice Payments on a note secured by a trust deed are made to the A) trustor. B) beneficiary. C) trustee. D) mortgagor.
B) beneficiary. The lender is the beneficiary. He furnishes the funds for the loan and receives the payments. The trustee only handles default, foreclosure and reconveyance functions.
Ms. Barlow has an interest in her property over and above her mortgage debt. Her interest is called A) an equality. B) equity. C) a surplus. D) an escrow.
B) equity. Equity is the difference between the value of the property owned and the loans against that property.
The Federal Dept. of Veterans' Affairs A) services its own loans. B) guarantees loans. C) insures loans. D) discounts loans.
B) guarantees loans. The VA guarantees lenders against loss in the event the veteran (borrower) defaults and foreclosure is necessary. The lenders service their own loans.
During a period of high inflation, the Federal Reserve Board can limit to some degree the expansion of currency by A) increasing the income tax. B) increasing reserve requirements of member banks. C) decreasing reserve requirements of member banks. D) decreasing the income tax.
B) increasing reserve requirements of member banks Federal Reserve controls inflation by controlling the supply of money in circulation in this country
The conditions of most loan instruments require the borrower to pay all of the following when they are due EXCEPT A) principal and interest. B) recording fees. C) property taxes. D) insurance premiums.
B) recording fees.
Normally, if a non-veteran purchases a property subject to a federal VA loan, A) the loan must be paid off. B) the veteran is still liable for mortgage payments. C) the transaction is void. D) the veteran is released from liability.
B) the veteran is still liable for mortgage payments. Whenever a person takes "title subject to a loan" the original borrower remains fully liable for the loan payments.
A trust deed is satisfied on the public records A) by recordation of a deed. B) when a reconveyance deed is recorded. C) when final payment has been made by the grantor. D) by posting a guarantor's bond.
B) when a reconveyance deed is recorded. If the trust note has been paid in full, the beneficiary will request the trustee to sign and issue a deed of reconveyance to the grantor. When recorded, this will clear the lien from the title.
An endorser of a note who does not guarantee payment of the note to the person to whom he immediately assigns it and to all future holders endorses it A) with recourse. B) without recourse. C)in blank. D) with protest.
B) without recourse. When a person endorses a note "without recourse" he is stating that the person receiving the note cannot take action (they have "no recourse") against him in the event they do not receive payment.
A building sold for $167,000. Earnest money in the amount of $30,000 was deposited, and the buyer obtained a loan for the balance. The lender charged a 1.75% set-up fee. What was the total cash outlay for this property? A) $33,028 B) $32,055 C) $32,398 D) $32,922
C) $32,398 Loan = $167,000 Earnest= $30,000 $167,000- $30,000= $137,000 $137,000 x lender fee (1.75%) = $2,397.50 total CASH Outlay = $30,000 + $2,397.50 = $32,398
The statutory right of redemption of an Oregon real estate mortgagor is terminated A) 7 years following the foreclosure sale. B) 60 days following the foreclosure sale. C) 180 days following the foreclosure sale. D) upon entry of the judicial foreclosure decree of the court.
C) 180 days following the foreclosure sale. The right of redemption following a mortgage foreclosure is 180 days and established by state statute, not by the lender.
Which of the following statements concerning purchase money mortgages is TRUE? I. A purchase money mortgage is an instrument given to the seller from the buyer to finance the purchase of real property. II. The mortgagee may foreclose a delinquent mortgage and forego a deficiency judgment, or may waive the security and sue only on the note. A) I only B) II only C) I and II D) Neither I nor II
C) I and II A purchase money mortgage is given to the seller. If the seller forecloses he cannot obtain a deficiency judgment. However, as with all mortgages, there is a note which can be sued upon. The mortgagee can sue on the note and get a judgment lien instead of foreclosing on the mortgage and risking a deficiency.
If the mortgagee has the property sold at a foreclosure sale and it brings an amount inadequate to pay off the loan, what can the mortgagee do? I. May be able to obtain a deficiency judgment. II. Cancel the sale. A) II only B) I and II C) I only D) Neither I nor II
C) I only A "deficiency judgment" is a judgment against the borrower for the balance of a debt owed when the foreclosure sale of a property produces less than the amount needed to pay the costs and expenses of the foreclosure action and to satisfy the obligation incurred by the foreclosed mortgage. The mortgagee can sue for the deficiency, but cannot cancel or void the sale because of deficiency.
All of the following documents could be used in the foreclosure of a real estate mortgage EXCEPT a(n) I. indenture deed. II. sheriff's deed. III. lis pendens. A) I and II B) II and III C) I only D) III only
C) I only In a mortgage foreclosure a lis pendens can be filed to show that a foreclosure suit is pending. A sheriff's deed is given to the high bidder at the foreclosure sale, at the end of the redemption period.
When property secured by a trust deed is foreclosed by advertisement and sale, the I. trustee may make a bid on the property on his own behalf. II. lender may make a bid on the property. III. trustee executes a trustee's deed to the purchaser. A) I, II and III B ) I and II C) II and III D) II only
C) II and III At a trustee's sale, the lender (beneficiary) and the borrower (grantor) may bid. The trustee who is conducting the sale cannot bid, as to do so would be a conflict of interest. After the sale, the trustee will give a deed (the trustee's deed) to the purchaser.
"Boot" is the name used for a factor arising in which of the following cases? I. When depreciating property for tax purposes. II. Where there is a difference between the equity of properties being exchanged. A) I only B) Neither I nor II C) II only D) I and II
C) II only Boot" is the term used to describe money or property given to even out the equities in an exchange.
The trustee in a trust deed executed in Oregon receives I. full legal title to the real property described in the deed. II. the "power to sell" in the event the grantor of the trust deed defaults. A) Neither I nor II B) I only C) II only D) I and II
C) II only The trustee is the neutral third party. Being neutral, he cannot be the borrower or the lender (except in the case of government loans where a government agency can be both the lender and the trustee). He has the power to sell the property in the event of default by the borrower.
Which of the following statements concerning the Real Estate Settlement Procedures Act (RESPA) is FALSE? A) All persons obtaining a federally-related new mortgage loan to purchase a residence must receive a copy of Housing and Urban Development's settlement cost brochures. B) RESPA covers all sales of one-to-four family residences when the purchaser is obtaining a federally-related mortgage loan to purchase the property. C) Real estate brokers may not split commissions with cooperating members of their multiple listing service. D)A lender may not receive a referral fee for sending a seller to a specific title insurance company.
C) Real estate brokers may not split commissions with cooperating members of their multiple listing service.
Payments on a note secured by a trust deed are made to the A) trustee. B) mortgagor. C) beneficiary. D) trustor.
C) beneficiary. The lender is the beneficiary. He furnishes the funds for the loan and receives the payments. The trustee only handles default, foreclosure and reconveyance functions
The mortgagee sues the mortgagor and obtains a judgment and a court order to sell the property. This is an example of A) strict foreclosure. B) nonjudicial foreclosure. C) judicial foreclosure. D) voluntary foreclosure.
C) judicial foreclosure. Foreclosure through the court is a judicial foreclosure. In this example, the procedure would be a "foreclosure and sale." "Strict foreclosure" is a foreclosure without a sale, resulting in the property being returned to the lienholder.
An appraiser seeking to find market value would be least concerned with A) reproduction cost. B) exchange value. C) original cost of material. D) market data.
C) original cost of material. In an appraisal, the appraiser would use market data to estimate exchange (market value). He would also estimate reproduction or replacement cost in a cost analysis. Neither the cost of construction nor the cost of acquisition would be relevant to the market data approach.
The TILA-RESPA Integrated Disclosure (TRID) Rule provides A) that real estate advertisements must include the annual percentage rate, including all charges. B) a secondary market for mortgage loans. C) that the mortgagor must be given an estimate of the closing costs before the time of closing. D)that real estate syndicates must obey "blue-sky" laws.
C) that the mortgagor must be given an estimate of the closing costs before the time of closing The TILA-RESPA Rule applies to first and second residential mortgage loans made by federally-related lenders. Where the law applies, the lender must provide a special information booklet ("Settlement Costs") published by HUD, within 3 business days of the application, give a Loan Estimate Form with the terms and costs of the loan, and prepare and give to the borrower a Closing Disclosure (itemizing closing costs).
Nancy wants an 11% rate of return on a building with an annual income of $99,000. Annual expenses are $44,000. What should she be willing to pay for the property? A) $440,000 B) $550,000 C)$500,000 D) $50,000
C)$500,000 find net income first: $99,000 - $44,000 = $55,000 net income $55,000/.11(rate) =$500,000 property value to get $99,000 annual income
The mortgagee sues the mortgagor and obtains a judgment and a court order to sell the property. This is an example of A) strict foreclosure. B) voluntary foreclosure. C)judicial foreclosure. D) nonjudicial foreclosure.
C)judicial foreclosure. Foreclosure through the court is a judicial foreclosure. In this example, the procedure would be a "foreclosure and sale." "Strict foreclosure" is a foreclosure without a sale, resulting in the property being returned to the lienholder.
There are three main causes of depreciation. Which one of these finds its origin in social sources which is the basis for the old axiom known in social circles, that "more houses are torn down than fall down"? A) Physical deterioration B)Straight-line depreciation C)Functional obsolescence D) Economic obsolescence
D) Economic obsolescence Economic obsolescence results from factors outside the property (e.g., zoning, neighborhood blight, airport noise, changes in tax laws, etc.) so it is incurable. Functional obsolescence is within the property boundaries; economic obsolescence is outside. Economic obsolescence, being incurable, would cause buildings to be torn down before they fall down.
When an appraiser uses the capitalization method of evaluating property, he will take into account I. future income. II. accrued depreciation. A) Both I and II B) II only C) Neither I nor II D) I only
D) I only In the income approach the present worth is based on the new owner's anticipated future income. Accrued depreciation is depreciation that has occurred. It is measured in the cost approach. In the capitalization approach, accruals for future depreciation are measured.
A distinguishing feature of the Oregon trust deed, when compared to a mortgage, is the I. power of sale clause in the trust deed. II. longer redemption period in the trust deed. A) Neither I nor II B) II only C) I and II D) I only
D) I only Under a mortgage the lender must foreclose through the court. Under a trust deed, the lender has the option of foreclosing though the court or having a neutral 3rd party (the trustee) foreclose, exercising a power of sale given him in the trust deed. There is no redemption period after a trustee sale. If the trust deed is foreclosed in court the redemption period is 180 days, as it is with a mortgage.
The Closing Disclosure used under the Truth-in-Lending Act (Regulation "Z") is concerned with the I. real estate taxes assessed on the property. II. legal fees charged to prepare the deed to the property. A) I only B) II only C) I and II D) Neither I nor II
D) Neither I nor II The lender must disclose all finance charges (loan fees, finder's fees paid to the person bringing the borrower to the lender, service charges, points, mortgage insurance premiums and interest). He must add these charges together and calculate them as a percentage of the loan balances during the term of the loan, to arrive at an "annual percentage rate" ("APR"). The APR can then be used as a means of comparing costs among lenders. Actual costs not retained by lenders (title fees, legal fees, closing costs, property taxes, appraisal fees, recording fees, notary fees, etc.) are not considered finance charges and are not included in the APR.
If a commercial property sold at a court foreclosure does not sell for an amount sufficient to satisfy the mortgage loan debt, the mortgagee may obtain A) damages. B) a judgment by default. C) a satisfaction of mortgage. D) a deficiency judgment.
D) a deficiency judgment. A "deficiency judgment" is a judgment against the borrower for the balance of a debt owed when the foreclosure sale of a property produces less than the amount needed to pay the costs and expenses of the foreclosure action and to satisfy the obligation incurred by the foreclosed mortgage.
The existing mortgage debt which is taken over by the purchaser as part of the selling price is called a(n) A) blanket mortgage. B) extension of mortgage. C) subordinated mortgage. D) assumed mortgage.
D) assumed mortgage. When a buyer takes title to property with the existing loan to remain outstanding, he is said to have assumed the mortgage.
Construction financing is usually designed as A) low interest, long-term loans. B)high interest, long-term loans. C)low interest, short-term loans. D) high interest, short-term loans.
D) high interest, short-term loans.
You, as the agent, have just sold a piece of property and have negotiated for a new first loan and also a second loan for the buyer. The first loan was made by the bank. The second loan was carried by the seller. You have been asked to record a "Request for Notice of Default." Usually this would be done for the protection of the A) trustee for the bank loan. B) lender of the bank loan. C) grantor of the second loan. D) lender of the second loan.
D) lender of the second loan. The "request for notice of default" is a request that the lienholder be notified if a lien is in default. This protects the junior lienholder as his lien would be eliminated if the first lien were foreclosed and there were not enough proceeds from the foreclosure sale to pay his lien off.
Amortization is the process of A) paying an acceleration clause in a mortgage. B) converting net income into an indication of value. C) redemption. D) liquidation of a debt.
D) liquidation of a debt Amortization is the gradual repayment or retiring of a debt by means of systematic payments of principal (and interest) over a set period so that at the end of the period there is a zero balance.
Conventional loans are made from A) "Fannie Mae" funds. B) FHA funds. C) Homeowners' Loan Corporation. D) private sources.
D) private sources. Loans not involving government insurance or guarantee are called "conventional loans." These loans are made by private lenders or government sponsored entities, such as Fannie Mae or Freddie Mac.
An endorser of a note who does not guarantee payment of the note to the person to whom he immediately assigns it and to all future holders endorses it A) in blank. B) with protest. C) with recourse. D) without recourse.
D) without recourse.
An endorser of a note who does not guarantee payment of the note to the person to whom he immediately assigns it and to all future holders endorses it A) in blank. B) with protest. C) with recourse. D) without recourse.
D) without recourse. When a person endorses a note "without recourse" he is stating that the person receiving the note cannot take action (they have "no recourse") against him in the event they do not receive payment.
If the foreclosure sale proceeds are less than the outstanding debt and foreclosure expenses, which of the following remedies is available to the mortgagee? A)The mortgagee may void the sale. B) The mortgagee must absorb the loss, since the mortgagor is liable only for foreclosure expenses. C) The owner has the statutory right of redemption. D)The mortgagee may obtain a deficiency judgment against the mortgagor.
D)The mortgagee may obtain a deficiency judgment against the mortgagor. A "deficiency judgment" is a judgment against the borrower for the balance of a debt owed when the foreclosure sale of a property produces less than the amount needed to pay the costs and expenses of the foreclosure action and to satisfy the obligation incurred by the foreclosed mortgage. The mortgagee can seek the deficiency judgment, but cannot cancel or void the sale because of deficiency.
balloon mortgage
Describes a partially amortized loan. payment made at the end of the term , considerably larger than the previous payments
mortgagee.
Lender is receiving the mortgage
deed of trust / trust deed
a form of mortgage that is available in many states, particularly those that do not have laws allowing for a power of sale provision in a mortgage. It has the same type of provisions as a mortgage with the major difference being in provisions relating to foreclosure.
junior mortgage
a lien on real property that is subordinate to another mortgage that was previously recorded. It may be in second, third, or lower priority
wraparound mortgage
a second mortgage, which is subordinate to an existing first and unsatisfied lien on the property. It differs from other junior liens in that the face amount of the wrap includes the amount borrowed on the junior lien plus the amount owed on the first lien.
mortgage
a written contract pledging real property the borrower owns or will own to secure the debt.
foreclosure sale
an auction sale to the highest bidder.
Mortgagor
borrower gives the mortgage
variable-rate mortgage/ Rollover Mortgage
has a variable interest rate provision that allows the interest rate to be increased in an inflationary economy or decreased when market conditions cause current interest rates to drop.
amortized loan
involves gradual liquidation or extinction of the loan during the term of the loan through periodic payments to principal as well as interest.
variable rate" (or "adjustable") mortgage
one in which the interest rate is based on an agreed index and will go up or down based on that index.
blanket mortgage
one mortgage that covers more than one parcel of real estate as security.
fixed-rate mortgage
provides for an interest rate that will remain fixed for the entire term of the loan.
term Mortgage
provides for payment of interest only, with no amortization (reduction of the loan balance) during the term of the loan. The word "term" describes the fact that the entire principal amount is due at the end of the term.
right of redemption
right to reclaim ownership of the property by paying off the entire amount of the debt and foreclosure costs
Rescission
right to rescind the transaction within three business days of signing the loan documents. Rescission rights apply to a home equity loan, line of credit, or home improvement loan secured by the borrower's principal residence.