Review questions chapter 7
When traded in the market, Jr. loans are usually sold at
A discount
All of the following encumbrances are considered Junior loans except
A note and the first deed of trust
Interest rates on real estate loans are established by
Agreement between the lender and borrower
A cross defaulting clause in a junior loan
Automatically triggers a default on the junior loan
In the event of a default of the priority senior loan, a junior lender can usually do all of the following except
Change the terms of the junior loan
Junior finance is often utilized for all of the following except
DVA guaranteed loans
Lenders made increase their Yield on real estate loans by using all of the following techniques except
Decreasing the loan term
Interest rates on Junior loans carried it back by home sellers are usually
Equal to or lower than market rates
Are use a junior finance through owner carry backs increase when
Market interest rates are low
Creating a junior loan at the same time as a senior loan is known as
Piggyback lending
A lifting clause in a junior loan contract allows the
borrower to refinance without disturbing the status of the junior loan.
Home equity loans are popular among borrowers because the interest they pay on these loans is
deductible on federal income taxes.
A property seller may choose to carry back a portion of the sale price when the buyer
has insufficient cash for the deposit.
Equity in one's home is generally acquired through a paydown of the first mortgage balance or a(n)
increase in the property's value.
Unlike other types of home equity loans, home-improvement loans may have
longer repayment terms.
Land developers sometimes use junior financing to pay for
offsite improvements.
Lenders solicit borrowers for home equity loans because they can mitigate the risks of these loans by controlling the interest rate and
periodically checking the value of the collateral.
Some lenders provide combinations of first and second mortgages which are known as
piggy-back loans.
When home equity loans become due, borrowers usually
refinance the entire property.
The risk inherent in junior finance is that the
senior lender will get all the money at a foreclosure.