14 & 15 Quiz
Which of the following statements about VA-guaranteed loans is TRUE? a. There is no maximum VA loan amount. b. Only eligible veterans with entitlement intact can assume a VA loan. c. VA loans can only be used to finance detached single-family homes. d. A veteran can use a VA loan only once in their lifetime.
a
The loan amount expressed as a percentage of the value of the real estate offered as collateral is the a. amortization ratio. b. loan-to-value ratio. c. debt-to-equity ratio. d. capitalization rate.
b
A mortgagor is the one who a. gives the mortgage. b. holds the mortgage. c. provides the mortgage funds. d. forecloses on the mortgage.
a
The defeasance clause in a deed of trust requires the trustee in a specified situation to execute a. an assignment of mortgage. b. a satisfaction of mortgage. c. a subordination agreement. d. a partial release agreement.
b
A land contract provides for the a. sale of unimproved land only. b. sale of real property under an option agreement. c. conveyance of legal title at a future date. d. immediate transfer of reversionary rights.
c
A mortgage loan requires monthly debt service payments of $675.75 for 20 years and a final payment of $5,095. This type of a mortgage loan is a. a wraparound mortgage. b. an accelerated mortgage. c. a balloon mortgage. d. a variable mortgage.
c
A person who assumes an existing mortgage loan is a. not liable for the maintenance of the collateral property. b. not in danger of losing the property by default. c. personally responsible for paying the principal balance. d. generally released from liability, but not always.
c
A promissory note a. may not be executed in connection with a real estate loan. b. is an agreement to perform or not to perform certain acts. c. is the primary evidence of a debt. d. is a guarantee by a government agency.
c
The clause in a deed of trust or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default by the borrower is the a. alienation clause. b. escalator clause. c. forfeiture clause. d. acceleration clause.
d
The financial interest in a property held by the owner in excess of any liens against it is called a. hypothecation. b. subordination. c. leverage. d. equity.
d
The purpose of the Real Estate Settlement Procedures Act (RESPA) is to a. ensure that buyers do not borrow more money than they can repay. b. make real estate brokers more responsive to the needs of buyers. c. help sellers know how much money is required to purchase the property. d. see that borrowers know all of their settlement costs.
d
The type of loan that will MOST likely have the lowest loan-to-value ratio is a a. VA loan. b. FHA loan. c. USDA loan. d. conventional loan.
d
A mortgage loan that is secured by both real and personal property is called a a. blanket mortgage. b. package mortgage. c. purchase money mortgage. d. wraparound mortgage.
b
A buyer obtained a 30-year fixed-rate loan for $72,000 at a 5% annual interest rate. If the monthly debt service payment is $386.64, how much interest rounded to the nearest dollar would the buyer pay over the lifetime of the loan? a. $31,190 b. $67,190 c. $98,380 d. $108,000
b $386.64 × 360 months = $139,190 total PI payments - $72,000 LV = $67,190 total interest
Regulation Z applies to a. business loans. b. real estate sales agreements. c. commercial loans less than $10,000. d. personal credit transactions less than $25,000.
d
Which of the following is TRUE about an installment land contract? a. The buyer is given immediate possession and use of the property. b. The seller delivers a deed to the buyer. c. The buyer obtains a mortgage loan from a traditional lender. d. The seller delivers legal title to the buyer at settlement.
a
If the yield on a 30-year fixed-rate loan is 7¼% and a mortgage lender charges one point, what is the interest rate on the mortgage note? a. 7⅛% b. 7¼% c. 7¾% d. 8¼%
a 7¼% - ⅛% = 7⅛%
The Equal Credit Opportunity Act a. is a federal law that regulates real estate agent actions in advertising financing for listings. b. requires that a rejected credit applicant be told why credit was denied. c. has protected classes that are identical to fair housing laws. d. is a state banking law that regulates mortgage lender practices.
b
The Truth-in-Lending Act sets forth requirements regarding real estate loans to individuals for all of the following purposes EXCEPT a. equity lines of credit. b. commercial purposes. c. additions to residential properties. d. installation of a backyard swimming pool.
b
All the following might be part of an adjustable rate mortgage EXCEPT a. payment cap. b. anniversary cap. c. cap rate. d. lifetime cap.
c
An FHA-insured mortgage loan would be obtained from a. the Federal Housing Administration. b. the Department of Housing and Urban Development. c. any qualified lending institution. d. any qualified insuring institution.
c
An existing mortgage loan can have its lien priority lowered through the use of a a. hypothecation agreement. b. satisfaction of mortgage. c. subordination agreement. d. reconveyance of mortgage.
c
FNMA's activities include buying and selling of all of the following EXCEPT a. FHA and VA mortgages. b. conventional mortgages. c. mortgages at full face value. d. mortgages at discounted values.
c
Mortgage lenders want assurance that future real estate taxes will be paid. The MOST common way to do this is to require the borrower to a. obtain lender title insurance coverage. b. prepay the property taxes by January 31 of each year to satisfy the tax liability for the year. c. make installment payments into an escrow account. d. submit receipts to the lender showing the taxes have been paid.
c
The Federal Home Loan Mortgage Corporation was established as a secondary mortgage market entity to assist the a. Federal Housing Administration. b. Federal National Mortgage Association. c. federal savings and loans. d. federal banks.
c
The administrative fee charged by the lender to make the loan is a. a loan discount fee. b. an advance interest payment. c. a loan origination fee. d. a mortgage insurance premium.
c
The federal agency that is tasked with the oversight of the public welfare in connection with lending practices is the a. Federal Reserve. b. Housing and Urban Development Agency. c. Consumer Financial Protection Bureau. d. Federal Trade Commission.
c
The grantor becomes the lessee and the grantee becomes the lessor under which of the following financing arrangements? a. Lease with option to buy b. Wraparound mortgage c. Sale and leaseback d. Assumption of mortgage
c
The servicing of mortgage loans includes all of the following activities EXCEPT a. collecting payments. b. paying real estate taxes from escrow accounts. c. loan modifications. d. sending overdue notices.
c
When real estate is sold under an installment land contract, the legal title a. is subject to a purchase money mortgage agreement. b. must be transferred to a land trust. c. is held by the seller until the purchase price is paid in full. d. is transferred to the buyer at settlement.
c
In North Carolina, a deficiency judgment a. is allowed on purchase money deeds of trust. b. is a specific lien that attaches to all real property currently owned by the debtor in the county filed. c. would not be discovered by a title search. d. can be renewed by the creditor.
d
The trustee foreclosed on a property after the borrower defaulted on the loan payments. At the foreclosure auction, however, the house sold for only $129,000. The unpaid balance of the loan at the time of the sale was $140,000. What must the lender do to recover the $11,000 the borrower still owes? a. Sue for damages b. Sue for specific performance c. Seek a judgment by default d. Seek a deficiency judgment
d
When a mortgage loan has been paid in full, it is important for the borrower to be sure that a. the paid note is placed in a safe deposit box. b. a deed of partial reconveyance is obtained. c. the paid mortgage is returned to the lender. d. the satisfaction of mortgage is recorded.
d
When compared with a 30-year payment period, taking out a loan with a 20-year payment period would result in all of the following EXCEPT a. faster amortization. b. higher monthly payments. c. quicker equity buildup. d. greater escrow amounts.
d
Which of the following statements is TRUE? a. The priority of a mortgage is determined by the execution date. b. A mortgage document contains no covenants on the part of the borrower. c. A deed of trust is typically conveyed by the trustor to the beneficiary. d. A promissory note has to be in writing to be enforceable, but it is not normally recorded.
d
A lender will take all the following factors into consideration when deciding whether or not to approve a borrower's mortgage loan application EXCEPT a. the marital status of the borrower. b. the creditworthiness of the borrower. c. the amount of the borrower's income. d. the borrower credit score.
a
Which of the following pairs of terms is considered MOST synonymous? a. Interim financing and construction loan b. Construction loan and variable rate loan c. Pass-through loan and assumption loan d. Take-out loan and construction loan
a
Which of the following statements is TRUE? a. All FHA-insured and VA-guaranteed loans are assumable. b. Interest rates on VA-guaranteed loans are set by VA. c. FHA loans are funded by public funds through private lenders. d. Only eligible veterans can assume a VA loan.
a
A building was sold for $115,000. Down payment in the amount of $15,000 was deposited in escrow, and the buyer obtained a new loan for the balance of the purchase price. The lender charged two discount points. What was the total amount charged to the buyer for points in this purchase? a. $2,000 b. $2,300 c. $3,000 d. $14,375
a $115,000 SP - 15,000 DP = $100,000 LV × 0.02 = $2,000 pts.
If a buyer obtains a $150,000 mortgage at 7½% annual interest with one and one-half points, how much will the lender charge for the points at settlement? a. $2,250 b. $11,250 c. $17,250 d. $22,500
a $150,000 LV × 0.015 = $2,250 pts.
A longer mortgage loan term will a. decrease the number of loans being made. b. result in lower monthly mortgage payments. c. prevent many individuals from owning homes. d. cause interest rates to increase.
b
A mortgage broker generally offers which of the following services? a. Handling the escrow procedures b. Bringing the borrower and the lender together c. Providing credit qualification and evaluation reports d. Granting real estate loans using investor funds
b
Charging more interest than is legally allowed is known as a. escheat. b. usury. c. a deficiency. d. an estoppel.
b
Fannie Mae a. originates FHA loans in the primary mortgage market. b. purchases FHA loans in the secondary mortgage market. c. provides farm loans. d. provides insurance for FHA loans.
b
Fannie Mae and Freddie Mac have a common purpose of a. originating residential mortgage loans. b. purchasing existing mortgage loans. c. insuring residential mortgage loans. d. guaranteeing existing mortgage loans.
b
If the proceeds from the sale of a foreclosed property are less than the amount required to satisfy the outstanding mortgage loan debt and legal expenses, the grantor may be responsible for a. a default judgment. b. a deficiency judgment. c. liquidated damages. d. punitive damages.
b
In a title theory state, a borrower's default could result in the collateral property being sold at auction as part of a a. judicial foreclosure. b. power of sale foreclosure. c. deed in lieu of foreclosure. d. strict foreclosure.
b
In absence of an agreement to the contrary, the mortgage having priority will be the one a. for the highest amount. b. that was recorded first. c. that was signed first. d. that is a construction loan.
b
The right a grantor has to regain the property ownership by paying the debt after a foreclosure sale is called a. acceleration. b. redemption. c. reversion. d. recapture.
b
Which of the following statements is NOT TRUE regarding the secondary mortgage market? a. Fannie Mae can purchase conventional, FHA, and VA loans. b. Freddie Mac originally purchased conventional loans primarily from savings associations. c. Ginnie Mae is associated with conventional loans. d. Non-conforming loans do not comply with secondary market guidelines.
c
A developer had a mortgage loan on an entire development. When a lot was sold to a buyer, the developer was able to deliver title to that lot free of the mortgage lien by utilizing a partial release. What type of loan did the developer have? a. Blanket mortgage b. Purchase money mortgage c. Package mortgage d. Open-end mortgage
a
A friendly foreclosure enables a grantor to prevent the trustee from taking the property by statutory means. This can be accomplished by a. a deed in lieu of foreclosure. b. a reconveyance deed. c. an assumption. d. an escrow deed.
a
A homebuyer recently financed his first home with a fixed-rate conventional loan. The type of interest he will pay over the life of the loan is probably a. simple interest. b. variable interest. c. compound interest. d. discounted interest.
a
A lender may require the borrower to obtain additional security for the lender in the event of a borrower default on the loan. That security might arise from a. private mortgage insurance. b. title insurance. c. hazard insurance. d. impound accounts.
a
If the amount realized at a mortgage foreclosure auction is more than the amount of the indebtedness and expenses, then the excess belongs to the a. grantor. b. beneficiary. c. trustee. d. county.
a
The clause in a mortgage loan instrument that would prevent the assumption of the mortgage loan by a new purchaser is a. an alienation clause. b. a power of sale clause. c. a defeasance clause. d. a certificate of sale clause.
a
The purpose of a deed of trust is to a. provide security for the loan. b. convey title of the property to the lender. c. restrict the borrower's use of the property. d. create a lien on the property.
a
Which of the following is NOT a required chief disclosure for compliance with the Truthin- Lending Act? a. Loan-to-value ratio b. Annual percentage rate c. Total of all finance charges d. Total amount financed
a
If a loan balance is $213,500 and the annual interest rate is 5½%, what is the amount of the next monthly interest payment? a. $381.18 b. $597.59 c. $978.54 d. $1,174.25
c $213,500 LV × 0.055 = $11,742.50 ann. int. ÷ 12 months = $978.54
Last month's debt service payment included $412.50 interest on a $60,000 loan balance. What is the annual rate of interest? a. 7½% b. 7¾% c. 8¼% d. 8½%
c $412.50 × 12 mos. = $4,950 annual int. ÷ $60,000 LV = 0.0825 = 8¼%
Presume the interest rate on an FHA-insured mortgage loan to be 6½% with a current monthly interest payment of $846. What would be the current principal? a. $65,988 b. $147,339 c. $156,184 d. $164,970
c $846 × 12 mos. = $10,152 annual int. ÷ 0.065 = $156,184 LV
A deed of trust differs from a mortgage in all of the following ways EXCEPT a. the number of parties involved in the loan. b. the obligation of the borrower to repay the funds. c. the redemption rights allowed after foreclosure. d. the time period permitted to cure a default.
b
An extension of credit from a seller to a buyer to allow the buyer to complete the transaction is called a a. growing equity mortgage. b. purchase money mortgage. c. package mortgage d. blanket mortgage.
b
The principal distinction between the primary mortgage market and the secondary mortgage market is in the a. insuring versus the guaranteeing of mortgage loans. b. origination versus the purchase of mortgage loans. c. use of mortgages versus the use of deeds of trust. d. use of discount points versus the use of origination fees.
b
The seller agrees to sell the property to the buyer for $100,000. The buyer was unable to qualify for a mortgage loan for this amount with a traditional lender so the seller and buyer enter into a contract for deed. The interest the buyer has in the property under a contract for deed is a. legal title. b. equitable title. c. joint title. d. reversionary title.
b
The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the a. wraparound mortgage. b. open-end mortgage. c. growing-equity mortgage. d. graduated-payment mortgage.
b
The pledging of property as security for payment of a loan is a. disintermediation. b. equity. c. hypothecation. d. subordination.
c
A borrower obtained a $7,000 second mortgage loan for five years at 6% interest per annum. Monthly debt service payments were $50. The final payment included the remaining outstanding principal balance. What type of loan is this? a. A fully amortized loan b. A straight loan c. A partially amortized loan d. An accelerated loan
c
A graduated payment loan is one in which a. mortgage payments decrease. b. mortgage payments balloon in five years. c. mortgage payments increase as scheduled. d. the interest rate on the loan adjusts annually.
c
A homebuyer financed his home five years ago with a high loan-to-value, fixed-rate loan. Due to a job transfer, the owner must move, but his home has suffered significant depreciation in value since purchase. Which of the following is NOT a legal way to handle the disposition of the property? a. Ask the lienholder to participate in a short sale transaction. b. The seller uses other assets to make up the shortfall between the outstanding mortgage loan balance and the proceeds from the sale. c. The owner could abandon the house and stop making loan payments. d. The owner can convert the house to a rental property and use the rent to make mortgage payments.
c
Which of the following terms may appear in an advertisement for a real estate loan without triggering Regulation Z full disclosure requirements? a. "$499 monthly payments" b. "Only one penny down" c. "8% interest rate or lower" d. "Assumable mortgages available"
d
If the monthly interest payment at 6% is $1,050, the principal amount of the loan is a. $63,000. b. $75,600. c. $126,000. d. $210,000.
d $1,050 × 12 mos. = $12,600 annual int. ÷ 0.06 = $210,000 LV
A borrower would MOST likely obtain a residential real estate mortgage loan from a. an insurance company. b. a pension fund. c. a commercial bank. d. a savings and loan association.
d
A real estate loan payable in periodic installments that are sufficient to pay the principal in full during the term of the loan is called a. a conventional loan. b. a straight loan. c. a participation loan. d. an amortized loan.
d
All of the following statements about short sales are true EXCEPT a. the lienholder cannot be forced to participate in the short sale. b. the borrower may be taxed on any debt that is forgiven by the lienholder. c. the lienholder can file for a deficiency judgment for debt not paid by the sale of the collateral property. d. Real estate brokers become actively involved in short sales negotiations.
d
An eligible veteran is under contract to purchase a home for $80,000 that he wants to finance with a VA-guaranteed 100% loan-to-value loan. Four weeks after contract formation, a certificate of reasonable value (CRV) for $77,000 was issued for the property. In this situation, the veteran may consider any of the following options EXCEPT a. withdrawing from the transaction without penalty. b. purchasing the property with an additional $3,000 cash from his own funds. c. negotiating with the seller to reduce the sales price $3,000. d. borrowing the $3,000 for the cash down payment from a private source.
d
In a sale-and-leaseback arrangement, the a. seller retains legal title to the real estate. b. buyer becomes the lessee. c. broker will not earn a commission. d. buyer becomes the lessor.
d
What is the maximum loan for which a borrower can qualify if his annual income is $84,000, his monthly recurring debt is $746, his estimated monthly taxes and insurance escrow amount is $285, his loan factor is 6.32, and the qualifying ratios are 28 and 36? a. $353,639 b. $310,127 c. $265,032 d. $235,601
d $84,000 ÷ 12 mos. = $7,000 mo. income × 28% = $1,960 PITI - $285 TI = $1,675 max PI ÷ 6.32 = $265.032 × 1000 = $265,032 max on income ratio; $7,000 mo. income × 36% = $2,520 (PITI + debt) -$285 TI - $746 debt = $1,489 max PI ÷ 6.32 = $235.601 × 1,000 = $235,601 max on debt ratio
