REE 3043 Ch. 9 Quiz

The element of an adjustable interest rate that is the "moving part" is the:

Index Rate

Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:

Teaser Rate

The Truth in Lending Act gives a home mortgage borrower how long to rescind a mortgage loan?

a. 24 hours b. A week c. Three days d. Two days Ans. c.

Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately:

a. 275 basis points b. 375 basis points c. 175 basis points d. 75 basis points Ans. a.

A partially amortizing loan always will have

a. A balloon payment b. A prepayment penalty c. Only one stated term d. Caps Ans. A

Ways that a lender may respond to a defaulted loan without resorting to foreclosure include all of the following except:

a. Accelerate the debt b. Allow short sale to a third party c. Defer or forgive some of the past-due debt d. Offer credit counseling Ans. a

Which of these aspects of a mortgage loan will be addressed in the note rather than in the mortgage?

a. Acceleration b. Prepayment penalty c. Takings d. Escrow requirement Ans. B.

A type of loan that has grown in volume in recent years which has raised concerns about predatory lending practices is the:

a. Adjustable rate mortgage b. Purchase money mortgage c. Power of sale mortgage d. Subprime mortgage Ans. d.

Which statement is correct about the right of prepayment of a home mortgage loan?

a. All home mortgage loans have the right of prepayment without charge b. Most home mortgage loans have the right of prepayment without charge, but not all, and the borrower should check the loan carefully c. Home mortgage loans never have the right of prepayment without charge unless it is explicitly stated d. home mortgage loans give the right of prepayment without charge only in some states Ans. b

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 simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as:

a. Bankruptcy b. Deed in lieu of foreclosure c. Equity right of redemption d. Foreclosure Ans. b.

When a buyer of a property with an existing mortgage loan acquires the property without signing the note for an existing loan the buyer is acquiring the property:

a. By deed of trust b. By assumption c. Subject to the mortgage d. By contract for deed Ans. c.

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?

a. Conventional home loan b. An assumable home loan c. Federal Housing Administration (FHA) loan d. Veterans Affairs (VA) loan Ans. A

For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off?

a. Defeasance prepayment penalty b. Prepayment lockout c. Curtailment penalty d. Yield-maintenance prepayment penalties Ans. A

A lender may reserve the right to require prepayment of a loan at any time they see fit through a(n):

a. Due-on-sale clause b. Acceleration clause c. Taking clause d. Demand clause Ans. d.

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

a. It is less costly for power of sale to be employed than judicial foreclosure. b. The foreclosed property is typically sold through a public auction administered by the court. c. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale. d. The power of sale treatment is faster than judicial foreclosure Ans. b.

Which if these points in a mortgage loan would be addressed in the mortgage (possibly in the note as well)?

a. Late fees b. Loan amount c. Inerest rate d. Escrows Ans. D.

Which of these statements is true about mortgage loans for income producing real estate?

a. They usually are partially amortizing loans b. They often have a prepayment penalty c. They often are nonrecourse loans d. They can be interest only loans e. All the above Ans. e.

The characteristics of a borrower than can be considered by a lender in a mortgage loan appreciation are limited by the:

a. Truth-in-Lending Act b. Community Reinvestment Act c. Equal Credit Opportunity Act d. Real Estate Settlement Procedures Act Ans. c

In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage?

a. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. b. Whether the borrower is released from liability for fulfillment of the contract. c. An unambiguous description of the property that is being pledged as collateral for the loan. d. How the interest rate is to be computed. Ans. C

A significant 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. For income-producing property, the most common index rate is the:

a. one-year U.S. Treasury constant maturity rate b. prime rate c. London Interbank Offered Rate (LIBOR) d. cost-of-funds index Ans. C.