RE250 Chapter 9 HW

If a homeowner in mortgage distress owes more than the value of the home and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All the following statements are true regarding a short sale EXCEPT:

A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

Based on your understanding of the relation between the several types of bankruptcy and the foreclosure process, which of the following types of bankruptcy strategies would you expect to be least harmful to a lender's mortgage interest?

Chapter 11 bankruptcy

The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business?

Chapter 11 bankruptcy

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court supervised workout for a troubled household?

Chapter 13 bankruptcy

Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause?

Conventional home loan

In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers?

Dodd-Frank Wall Street Reform and Consumer Protection Act

Which of the following acts prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program?

Equal Credit Opportunity Act (ECOA)

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Georgia, this right only extends to the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:

Equity of redemption

A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:

Mortgage (deed of trust）

In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e., the individual who receives the mortgage claim, is known as the:

Mortgagee

A considerable number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. Since 2021, the index rate increasingly used in the United States is the:

Secured Overnight Financing Rate (SOFR).

The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All the following statements regarding power of sale are true EXCEPT:

The foreclosed property is sold through a public auction administered by the court.

In the event a borrower defaults on the loan obligation, which of the following clauses enables the lender to declare the entire loan balance due and payable?

acceleration clause

Federal Housing Administration (FHA) loans are typically considered _____________blank, which means that the buyer can preserve the existing loan by signing the note as long as the buyer continues to qualify for the loan.

assumable loans

The dominant form of mortgage loan structure for income-producing property is a:

balloon mortgage loan

Home equity credit lines commonly offered by banks, have historically relied on which of the following index rates as the "moving part" in the adjustable rate offered to borrowers?

commercial bank "prime rate"

A contract for sale of the property with the special provision that the actual delivery of a deed conveying ownership will occur well after the buyer takes possession of the property is more commonly referred to as:

contract for deed

When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower with prior agreement in the loan docs to convey the property to the lender rather than pursue a court supervised process of terminating all the borrower's claims of ownership of the property, this is commonly referred to as:

deed in lieu of foreclosure.

If a property is sold, either in fact or in substance (e.g., through a lease with an option to buy), which of the following clauses gives the lender the right to "accelerate" the loan, requiring the borrower to pay it off?

due-on-sale clause

Because the mortgage conveys a complex claim for an extended period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account to pay obligations such as property taxes, community association fees, or causality insurance premiums?

escrow clause

Which of the following loan clauses releases the borrower from liability for fulfillment of the mortgage loan contract?

exculpatory clause

Because the mortgage conveys a complex claim for an extended period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower/mortgagor to maintain property casualty (hazard) insurance covering fire, windstorm, etc. and gives the lender joint control in the use of proceeds in case of major damage to the property?

insurance clause

In certain states, such as the state of Florida, the transfer of title to the lender does not occur until the borrower defaults. These states are referred to as:

lien theory states

Because the property is being pledged by the action of the borrower in a mortgage loan contract, the borrower is also referred to as the _____________blank of the mortgage claim.

mortgagor

Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be:

negatively amortizing

In many commercial real estate loans, the lender cannot hold the borrower personally liable in the event of a default except for environmental contamination, fraud, or misappropriation of funds.. Such loans are commonly referred to as:

nonrecourse loans

When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to:

purchase the property subject to the existing loan

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:

statutory redemption

Most adjustable rate mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:

teaser rate

In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as:

title theory states