Real Estate Part 5
Which of the following is a triggering term when used in advertising financing?
"10% down"
Which range of credit scores represents subprime borrowers?
580-669
Which range of credit scores represents the average score for Americans overall?
670 to 739
David is an active duty member of the U.S. Air Force. Assuming he and the property meet the qualifications, which type of mortgage may be the best option for him?
A VA-guaranteed loan
Sondra, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Sondra falls on hard times and misses multiple payments, and the bank indicates that it's going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Sondra holds the deed to the land. What kind of state does Sondra live in?
A lien theory state
Jim decided to refinance his three-year-old mortgage that has a balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called?
A prepayment penalty
Which of the following statements about the promissory note is true?
A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms.
What is a triggering term?
A word or phrase that, when used in advertising, requires the disclosure of all of the terms of a loan
What type of clause is this? "If any monthly installment under this Note is not paid when due and remains unpaid after a date specified by a notice to Mortgagor, the entire principal amount outstanding and accrued interest thereon shall at once become due and payable at the option of the Note holder."
Acceleration clause
Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.
Alienation
The ______ clause is also known as a due-on-sale clause.
Alienation
Albert wants to sell his house to his cousin, who's willing to assume his FHA loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?
Alienation clause
What's a discount point?
An upfront charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires
_______ is a standardized measure for interest rates and other costs of the loan.
Annual percentage rate
Which of the following is true about the Federal Housing Administration's qualifying standards for a mortgage loan?
Are somewhat less stringent than standards for conventional loans
Ava is borrowing money to buy some commercial property for her business. The loan agreement she signs includes a lock-in clause. What does that mean?
Ava will not be allowed to pre-pay the loan prior to the date specific in the loan agreement.
Which of the following documents is an example of a promissory note?
Borrower Keesha just signed a document that states that she pledges to pay back her mortgage loan of $310,000.
How does the Federal Housing Administration fund its mortgage insurance program?
By charging borrowers a mortgage insurance premium
When obtaining a mortgage to purchase a home, for what does the borrower use the property?
Collateral
The Equal Credit Opportunity Act is regulated by the ______.
Consumer Financial Protection Bureau
Which of the following statements best describes disintermediation?
Consumers are withdrawing more money from banks than they are depositing.
Craig's loan is secured by a mortgage. Who holds legal title when this security instrument is used?
Craig
A third party holds legal title to Jackie and Tom's house until their loan is paid off. What type of security instrument was used to secure the real estate transaction?
Deed of trust
A trustee is holding title to Cassandra's house until the loan is paid in full. Which type of security instrument was used?
Deed of trust
Gerard has been offered a 4% interest rate on a $300,000 mortgage. His monthly mortgage payment would run about $950 per month. He plans to pay $2,000 up front to drop his interest rate to 3.75% and his payment to $920 per month. What is this upfront charge called?
Discount point
What's an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires?
Discount point
River City Bank needs to cut back on lending. For several months, the bank has seen more withdrawals from customers than deposits. This has led to a decrease in deposits typically used for lending. What term can be used to describe what the bank has experienced?
Disintermediation
What's the term for an extended period of time during which banks experience more withdrawals than deposits?
Disintermediation
How is Regulation B related to the Equal Credit Opportunity Act?
Enforcement
When a contract is executory (for instance, in a land contract), what type of title does the buyer hold?
Equitable
The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.
Exculpatory
The contract Jack is signing has a clause that protects his assets from a deficiency judgment in case of foreclosure. What is this called?
Exculpatory
Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have?
FHA
Which entity services rural development loans?
FSA
Farm families financing the purchase of properties in rural areas may be able to obtain financing through this government agency if they meet certain criteria, such as income requirements.
Farm Service Agency
Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. He's able to do this in part because of the ______ offered by the USDA Farm Service Agency.
Guaranteed loans
Obtaining a 20-year mortgage instead of a 30-year mortgage results in which of the following?
Higher payments and less interest
in a mortgage, the property is used as collateral for the loan. What's the term for the process of pledging something as collateral?
Hypothecation
What personal information about the borrower is included in the Uniform Residential Loan Application?
Income
The Equal Credit Opportunity Act specifies that credit applicants must be judged using only what criteria?
Income, net worth, job stability, and credit rating
What's a key feature of the Federal Housing Administration's loan program?
Insures lenders against loss from borrower default
Which of the following describes the amount a lender charges a borrower for using money?
Interest
What must be done for a fee to be considered acceptable under RESPA?
It must be disclosed to the client.
What purpose does the promissory note serve?
It's a promise the buyer makes to the lender that the note will be repaid in full.
In a title theory state, which of the following is a true statement?
It's generally much easier for a lender to foreclose on a property.
What's one benefit of a rural development loan?
Its optional longer term means a lower monthly payment.
The CFPB uses education to accomplish its mission, such as the ______ publications.
Know Before You Owe
A ______ is a contractual agreement in which the buyer pays the seller the purchase price over time in a series of installments until the contract has been paid in full.
Land contract
What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?
Late charge
Which of the following clauses is included in Fannie Mae's multi-state note?
Late charge
Gina's mortgage payment arrives late one month. What language in the promissory note allows the lender to charge her a fee as a result?
Late charge provision
What's the name of the clause in a promissory note where this language appears: "If the Note Holder has not received the full amount of any monthly payment by the end of ______ calendar days after the date it is due, I will pay a late charge to the Note Holder"?
Late charge provision
Judd is the seller in an installment sales contract. What type of title does he retain until the buyer has paid the full purchase price?
Legal
Suzy is the buyer in an installment sales contract. What type of title will she have to the property once she meets her contractual obligations?
Legal
Which party to the loan approval process is responsible for providing the Loan Estimate?
Lender
Payment history, age of accounts, credit usage rate, and inquiries are factors considered in calculating a credit score. Which of the following is also considered?
Length of credit history
Tonia is buying a new home. She has a down payment of $30,000 and will obtain a $250,000 mortgage from a local bank to make up the remainder of the purchase price. What is this an example of?
Leveraging
The Barbers are looking to purchase a new home for their family of four, but they'll need to be approved for a loan. What document will they need to complete to initiate their loan process?
Loan application
What information does the Loan Estimate provide to buyers under required disclosures law?
Loan payment schedule
Which of the following is the best example of the economic principal of leveraging, as it applies to a real estate transaction?
Making a down payment
How can borrowers reduce the term of their mortgage and the interest paid when they don't elect either a shorter term loan nor a bi-weekly payment plan?
Making extra principal payments throughout the loan term
Information about which of the following is included in the Uniform Residential Loan Application?
Mortgage type
Which occupancy type is eligible for a VA loan?
Owner-occupied
What's the name of the clause included in a finance instrument that requires the lender to release a portion of the property from the lien when a part of the debt has been paid?
Partial release
Which of the following factors carries the heaviest weight when calculating a credit score?
Payment history
Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?
Power of sale
The ______ clause allows the borrower to pre-pay principal on the loan at any time without penalty.
Pre-payment
Which of the following is the name of a penalty lenders charge when borrowers repay their loans earlier than expected?
Prepayment penalty
Which of the following is a promise from the borrower to repay a certain sum of money to another party (the lender or holder of the note) under specified terms?
Promissory note
What information about the property is included in the Uniform Residential Loan Application?
Property value
Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?
Reconveyance
Robert and Carla are considering loan options. One of the options they're reviewing involves a higher monthly payment, but reduced total interest over the loan life. This loan option is called a ___________.
Reduced loan term
Whether borrowers use a formal (shorter-term or bi-weekly mortgage) or an informal (making periodic additional principal payments) payment plan, they can significantly reduce the total amount paid back to the lender by taking which of the following actions?
Reducing the principal balance on the loan as quickly as possible
What is the name of the set of regulations used to enforce the Equal Credit Opportunity Act?
Regulation B
The CFPB promotes consumer protection in the credit market through a number of strategies, including ______.
Responding to and investigating consumer complaints regarding financial services
For farmers and others who live in rural communities, a ______ loan may be available. One benefit of these loans is the option for a longer payback period.
Rural development
Chris is in the process of purchasing a property with 20 acres of farmland in a rural area of the state. Assuming his income meets the criteria of the program, what type of loan may Chris find the most desirable?
Rural development loan
Alyssa's mortgage loan is secured by the note and the mortgage. Which of the following is true if she lives in a lien theory state?
She holds title to the property, and the mortgage becomes a lien on the property.
If a negotiable instrument is transferrable, it must be ___________.
Signed
Why are lenders required to provide the Loan Estimate and Closing Disclosure forms to loan applicants and borrowers?
So borrowers can compare loans and make decisions regarding the affordability of loans offered
A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?
Subordination
Which clause refers to the order of liens on a property?
Subordination
Which of the following is a true statement about U.S. Department of Veterans Affairs loans?
The VA will guarantee a loan based on the sales price or the certificate of reasonable value (CRV).
The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.
The borrower
Who or what entity has legal title to a financed property in a lien theory state?
The borrower
Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."
The borrower is allowed to prepay the loan without penalty.
Sheila's financing calls for the use of a promissory note. What's a promissory note?
The borrower's promise to repay a certain sum of money to another party (the lender or holder of the note) under specified terms
A land contract, also known as an installment sales contract or contract for deed, is an agreement between which two parties?
The buyer and the seller
When a mortgage is used as a security instrument, who holds the mortgage and the promissory note?
The lender holds the mortgage and the note.
Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?
The lender tells the trustee to release the title to Olivia.
When a lender has a lien on a property via a mortgage, what rights does the lender hold?
The right to foreclose
Larry obtained a mortgage from State Bank. Larry owns the property, controls it, and has all the rights that come along with real property ownership. State Bank has an interest in the property and one other right. What is that?
The right to foreclose if the borrower defaults
In a land contract, which party finances the purchase of the property?
The seller
In a land installment contract, which party holds the deed to the property until the buyer pays the purchase price in full?
The seller
Who is responsible for requesting a loan payoff statement before closing?
The seller
What happens in an installment sales contract if the buyer is unable to make payments?
The seller can keep all of the proceeds received up until that point and repossess the property.
Which of the following is a reason a seller might consider selling property through a land contract rather than a traditional sale?
The seller may pay less in capital gains taxes by receiving the proceeds from the sale over time rather than in a lump sum.
When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?
The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.
What is the purpose of the Truth in Lending Act?
To better educate consumers about the cost of credit or obtaining a loan
Jennings has received a Closing Disclosure from his lender. What's the purpose of this form?
To detail all costs Jennings will owe at closing
What is the trustee's role when a deed of trust is used to secure property for a loan?
To hold legal title to the property on behalf of the beneficiary until the loan is repaid
What's the purpose of the ECOA?
To prevent discrimination in lending
How many parties does a mortgage involve?
Two: borrower and lender
Who guarantees VA loans?
U.S. Department of Veterans Affairs
The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation.
USDA Farm Service Agency
Which party to the loan approval process evaluates the loan application, the supporting documentation and data, and the property appraisal in order to make an approval recommendation?
Underwriter
Which of the following best describes collateral?
Using a house as security on a mortgage
Which of the following is a description of leveraging?
Using a small amount of cash to obtain a loan of a larger amount
Select the choice that best translates this clause into plain English. "Upon payment of all sums secured by this Mortgage, Mortgagee shall discharge this Mortgage without cost to Mortgagor. Mortgagor shall pay all costs of recordation, if any."
When the borrower has fully paid off the loan, the lender will record that the note is satisfied.