Section 4
Which of the following loans would be exempt from the Truth in Lending Act? Select one: a. A loan to purchase 4 residential units - one of which will be occupied by the owner b. An agricultural loan for $30,000 c. A loan with 10 installments d. A personal loan for $20,000
An agricultural loan above $25,000 would be exempt from the Truth-in-Lending Act.
A clause that means that the loan is not assumable is the: Select one: a. Subordination clause b. Alienation clause c. Partial release clause d. Escalator clause
An alienation clause is a due-on-sale clause which means that if the property is sold the loan must be paid in full and cannot be assumed.
Which of the following is not a financing instrument? Select one: a. A mortgage b. A deed of trust c. An option d. A note
An option is the right to purchase a property at a specified price for a specified period of time. It is not a financing instrument, as there is no borrowing. The correct answer is: An option
Which of the following will be given the greatest emphasis by a lender when qualifying an applicant for a VA loan? Select one: a. Income b. Marital status. c. Length of military service. d. All are important and would be given equal consideration.
a. Income
Which of the following is NOT prorated between buyer and seller at closing? Select one: a. Recording fees. b. Real estate taxes. c. Rents. d. Insurance premiums.
a. Recording fees.
Appraisal fees are set by: Select one: a. Amounts determined by law b. The appraiser's estimate of the time and effort involved in the assignment c. A percentage of the sale price d. Any of the above
b. The appraiser's estimate of the time and effort involved in the assignment
Sam is a licensed real estate salesperson and is working with a buyer in the purchase of a singlefamily residence. Sam recommends ACME Title to the buyer for the purchase of title insurance. ACME pays a referral fee to Sam. This action violates which of the following laws? Select one: a. Truth-in-Lending Act b. Fair Housing Act c. Real Estate Settlement Procedures Act d. None of the above, as the referral fee is not prohibited
c. Real Estate Settlement Procedures Act RESPA prohibits kickbacks such as referral fees by title insurance companies or other settlement service providers.
If a homeowner is in default on mortgage payments, the lender may foreclose. The right of the mortgagor to regain title by payment of all debts is known as the equity of: Select one: a. Revestment. b. Reversion. c. Redemption. d. Release.
c. Redemption. The foreclosed mortgagor (borrower) has the right to redeem his property after the foreclosure process has started, if he pays the debt and expenses.
A "purchase money mortgage" involves: Select one: a. Any mortgage used to finance the purchase of a property b. A mortgage with an LTV above 80% c. Seller financing of the purchase of a property d. A mortgage loan not made by a depository institution, but rather by a private third party
c. Seller financing of the purchase of a property A purchase money loan involves seller financing of the purchase.
What is the disadvantage to a lender if the lender accepts a "deed in lieu of foreclosure?" Select one: a. Length of time required to take legal action. b. All existing liens remain attached to the property. c. Past due real estate taxes become immediately due. d. There is no disadvantage to the lender.
A friendly foreclosure is a deed in lieu of foreclosure, wherein encumbrances attached to the property would transfer to the lender. The correct answer is: All existing liens remain attached to the property.
When a clause is included in a mortgage, requiring it to assume a lower lien priority position, it is called: Select one: a. An estoppel clause. b. An acceleration clause. c. A subordination clause. d. A participation clause.
A subordination clause states the rights of the mortgagee shall be secondary (subordinate) to a subsequent mortgage. The correct answer is: A subordination clause.
A loan in which the final payment on principal is exactly equal to the amount of the original loan is known as any of the following EXCEPT: Select one: a. Straight loan b. Partially amortized loan c. Interest only loan d. Term loan
If the amount of the final payment is exactly equal to the original amount of the loan, any payments made would be interest only. This loan is called a term loan, straight loan, or interest only loan, but never a partially amortized loan. The correct answer is: Partially amortized loan
If an individual defaults on a $100,000 mortgage and only $95,000 is received by the lender as a result of a court-ordered sale (foreclosure), which of the following is true? Select one: a. The lender must file a $5,000 judgment against the person who purchased the property. b. The lender may be entitled to a $5,000 judgment against the original borrower. c. The lender cannot recover the $5,000. d. None of the above.
In the situation described, the lender could file for a deficiency judgment against the original borrower and could recover the full amount, depending on the borrower's other assets and the law of the particular state. The correct answer is: The lender may be entitled to a $5,000 judgment against the original borrower.
The points to be paid on a loan are established by: Select one: a. The buyer. b. VA or FHA. c. The lender. d. HUD.
The lender sets the loan points (origination points) which must be paid. The correct answer is: The lender.
The terms of a mortgage loan would most comprehensively be listed in the: Select one: a. Promissory note. b. Mortgage. c. Sales contract. d. Discount note
The promissory note details all the terms of the loan. The correct answer is: Promissory note.
If the seller has already paid the annual property tax bill when the house is sold, how will the tax proration appear on the settlement statement? Select one: a. A debit to the buyer and a credit to the seller b. A debit to the seller and a credit to the buyer c. A debit to both the buyer and the seller d. A credit to both the buyer and the seller
a. A debit to the buyer and a credit to the seller
What is a blanket mortgage? Select one: a. A loan secured by more than one parcel of land b. A loan which refinances two existing loans c. A loan from a non-bank lender d. A loan secured by both real and personal property
a. A loan secured by more than one parcel of land
The finance charge is the total of all costs the borrower must pay for obtaining credit. Select one: a. True b. False
a. True
When a deed of trust is used to pledge real property as security for a loan, the lender is the? Select one: a. beneficiary. b. trustor. c. trustee. d. mortgagee.
a. beneficiary.
When computing the basis of a property, which of the following is not added to the acquisition cost? Select one: a. Cost of adding more room. b. Cost of adding central air conditioning. c. Closing costs of purchaser. d. Cost of repairing central air conditioning.
d. Cost of repairing central air conditioning.
he primary function of the FHA is to: Select one: a. Purchase loans in the secondary market b. Insure lenders against the death of a borrower c. To loan money to qualified borrowers d. To insure lenders against default by a borrower
d. To insure lenders against default by a borrower The FHA insures lenders against default by the borrower. It does not buy loans nor does it make mortgage loans. The funds are borrowed from lenders such as banks or mortgage companies.
Helen Ann obtained a loan from the ABC Mortgage Company. The monthly payments were set at a rate to fully amortize the loan over a 25 year period. In the note that Helen Ann signed, it specified that the entire balance was due at the end of 120 payments (10 years). What type of mortgage does this describe? Select one: a. Open end. b. Purchase money. c. Balloon. d. Participation.
n this loan, the final payment (remaining balance of the loan in 10 years) would be considerably larger than the regular monthly payment based on 25 year amortization, making the loan a balloon mortgage. The correct answer is: Balloon.
A mortgage is released by? Select one: a. Revision. b. Reconveyance. c. Quitclaim deed. d. Satisfaction
d. Satisfaction
If a seller sells a home "subject to" a loan, who has the liability to repay the loan? Select one: a. The seller only b. The buyer only c. Both the seller and the buyer equally d. Primarily the seller but the buyer has secondary liability
a. The seller only
The difference between a first and second mortgage is that the second mortgage must have a: Select one: a. Lower principal amount. b. Different lien position. c. Higher interest rate. d. Shorter term.
b. Different lien position.
When leasing property under a net lease, the tenant could deduct, as a business expense, all of the following EXCEPT: Select one: a. Maintenance. b. Fire insurance. c. Depreciation. d. Utilities.
c. Depreciation.
When the grantor's tax is calculated, how does the amount of the tax appear on the settlement sheet? Select one: a. Debit the buyer; credit the seller. b. Debit the seller; credit the buyer. c. Credit the seller, only. d. Debit the seller; nothing to the buyer
d. Debit the seller; nothing to the buyer
A mortgagor cannot be charged a penalty if he or she pays off the mortgage early. Select one: a. True b. False
The statement is false because some promissory notes include a prepayment penalty, which is a fee that is charged for paying off the loan early. The correct answer is: False
If Tony is planning to build a house on a vacant lot that he owns, he could apply to a bank for a construction loan. A typical construction loan is BEST described as: Select one: a. An open end mortgage. b. An open mortgage. c. A wraparound mortgage. d. A blanket mortgage.
a. An open end mortgage.
A lis pendens would be filed: Select one: a. In a judicial foreclosure b. In a trustee's sale c. Both of the above d. None of the above
a. In a judicial foreclosure
Real estate loans would be sold by a lender in the: Select one: a. Secondary mortgage market b. Primary mortgage market c. Federal Reserve Open Market d. Fannie Mae market
a. Secondary mortgage market
The type of closing where a meeting is held with the buyer, the seller, the lender, the title insurance company and various attorneys and third parties in attendance is known as a(n): Select one: a. Table closing b. Escrow closing c. Impound closing d. Conference closing
a. Table closing
Which is the superior lien in the event of a foreclosure? Select one: a. Tax lien. b. First mortgage. c. Junior Mortgage. d. Home equity loan.
a. Tax lien.
Harry is buying Sally's house and wants to assume her existing loan. Harry should have Sally request a(n): Select one: a. Payoff estimate. b. Reduction certificate. c. Escrow analysis. d. Satisfaction of mortgage.
b. Reduction certificate.
Which transactions are covered by RESPA? Select one: a. Residential first mortgage loans for owner-occupied homes. b. Residential first mortgage loans and owner financed loans. c. Commercial loans and residential first mortgage loans. d. All of these choices.
b. Residential first mortgage loans and owner financed loans.
When a new mortgage loan is made, which of the following documents must be recorded? Select one: a. The promissory note b. The mortgage c. Both of the above d. None of the above
b. The mortgage
What is the primary difference between a mortgage banker and a mortgage broker? Select one: a. The size of the loans they originate b. Whether they make loans or act as intermediaries between borrowers and lenders c. Whether they are required to be licensed d. The types of loans they originate
b. Whether they make loans or act as intermediaries between borrowers and lenders Mortgage bankers will make loans - meaning loan out their own money - while mortgage brokers will only act as intermediaries, bringing together borrowers and lenders.
What type of loan is a straight mortgage? Select one: a. A conventional loan b. A loan with equal monthly payments c. A loan whose interest rate does not change d. An interest-only loan
d. An interest-only loan
In a home loan using a trust deed, who holds naked legal title to the property? Select one: a. The trustor b. The beneficiary c. The intermediary d. The trustee
d. The trustee
The purpose of the Real Estate Settlement Procedures Act is to: Select one: a. Limit settlement costs to consumers b. To bar excessive interest costs c. To speed up real estate closings d. To allow consumers to shop for settlement services
d. To allow consumers to shop for settlement services RESPA is designed to educate consumers about closing costs and to allow consumers to shop for settlement services.
A lender on a first mortgage has been offered a deed in lieu of foreclosure by the defaulting borrower. Would the lender want to know about any junior loans against the property? Select one: a. Yes, because it gives the lender a measure of how responsible the borrower has been in managing debt. b. Yes, because the lender would have to make the payments on any junior loans. c. No, because the lender on the first mortgage would have priority over any other loans. d. No, because the borrower would be expected to continue making payments on any junior loan
b. Yes, because the lender would have to make the payments on any junior loans.
Which of the following statements is true regarding an assumed loan? Select one: a. The seller continues making the monthly payments b. The buyer has no personal liability for the payments c. The buyer has primary liability for making the payments d. The seller has no liability to the lender
c. The buyer has primary liability for making the payments the true statement is that in an assumption the buyer has the primary liability for making the payments. Choice D would be true if the seller received a lien release from the lender, but this is rare so choice C is the better answer.
In a trust deed loan, which of the following statements is correct? Select one: a. The trustor makes the monthly payment to the trustee b. The beneficiary makes the monthly payment to the trustor c. The beneficiary makes the monthly payment to the trustee d. The trustor makes the monthly payment to the beneficiary
In a trust deed loan the borrower is the trustor and makes the monthly payment to the beneficiary who is the lender.
Who holds the security in a deed of trust? Select one: a. The trustor. b. The mortgagor. c. The beneficiary. d. The trustee
In this question we are talking about a deed of trust, NOT a mortgage. The security is held by a neutral third party known as the trustee. With a deed of trust, the mortgagor (borrower) is called the trustor and the mortgagee (lender) is called the beneficiary. The correct answer is: The trustee.
Alice purchased a home and financed it using a mortgage which included the term "amortized over 30 years, due and payable after 10 years." Which of the following statements is correct? Select one: a. The loan will necessarily have negative amortization b. The loan is a partially amortized loan c. The loan will have a balloon payment d. Both B and C above
The loan is partially amortized because the loan balance is not fully-repaid by the maturity date with the regular payments. The last payment will be much larger than the others and is called a balloon payment. Both B and C are true.
A couple buys a furnished home by assuming the existing loan. Which of the following papers would the settlement attorney NOT have to prepare? Select one: a. Note and mortgage. b. Bill of sale. c. Assumption papers. d. Warranty deed.
The settlement agent will prepare a new deed and the assumption papers. The personal property in the home will be conveyed using a bill of sale. The buyers agree to make the payments on the existing loan which allows the existing note and mortgage to remain in effect. The correct answer is: Note and mortgage.
A trustee on a deed of trust pays the real estate taxes and insurance on the property. Select one: a. True b. False
The statement is false. The trustor (the borrower) is the owner of the property and is responsible for the property taxes and insurance.
Fred owns a house and has not paid his property taxes when due. The taxing authority initiates the process of conducting the tax sale. Prior to the sale date, Fred stops the process by paying the back taxes and penalties. Fred has exercised a(n): Select one: a. Equitable right of redemption b. Statutory right of redemption c. Constitutional right of redemption d. None of these choices
a. Equitable right of redemption Fred exercised the equitable right of redemption since it occurred prior to the sale. The statutory right of redemption occurs after the sale.
A lender receives a mortgage loan application from a consumer for the purchase of a single-family residence. How soon must the lender provide the applicant with a Good Faith Estimate of settlement costs? Select one: a. 5 business days b. 3 business days c. 7 business days d. None, as RESPA does not require Good Faith Estimates
b. 3 business days The GFE must be provided within 3 business days, but it is usually sooner than that.
When a mortgage loan is repaid, how is the lien released? Select one: a. A reconveyance deed must be recorded b. A satisfaction of mortgage must be recorded c. A lien release is signed d. Any of the above
b. A satisfaction of mortgage must be recorded
Thelma, a widow, owns her home free and clear. She has a fixed income which does not meet her current financial needs. Thelma wants to borrow money on her house in order to supplement her income. What type of loan would Thelma most likely apply for? Select one: a. A 15 year fixed rate fully amortized loan. b. An ARM (adjustable rate mortgage). c. A RAM (reverse annuity mortgage). d. A GPM (graduated payment mortgage)
c. A RAM (reverse annuity mortgage).
If a buyer gives a note and a mortgage to a seller as part of the purchase price, the resulting mortgage is commonly referred to as: Select one: a. A package mortgage. b. A wraparound mortgage. c. A purchase money mortgage. d. An open-end mortgage.
c. A purchase money mortgage.
When a city determines its spending level to determine the necessary level of property taxes needed that process is known as: Select one: a. Assessment b. Apportionment c. Appropriation d. Disintermediation
c. Appropriation
Which of the following entities will purchase mortgages in the secondary market? Select one: a. Fannie Mae b. Freddie Mac c. Both Fannie Mae and Freddie Mac d. Fannie Mae, Freddie Mac and Ginnie Mae
c. Both Fannie Mae and Freddie Mac Fannie Mae and Freddie Mac purchase mortgages in the secondary market. Ginnie Mae does not - it guarantees interest and principal payments on mortgages in mortgage pools.
A lender has been accused of violating a state's usury laws. This accusation would necessarily involve: Select one: a. Disintermediation b. Redlining c. Charging excessive interest rates d. Any of the above
c. Charging excessive interest rates Usury laws set maximum interest rates, so a usury accusation would necessarily involve charging excessive interest rates.
which of the following types of loans is most likely to experience negative amortization? Select one: a. Blanket mortgages b. Open-end mortgages c. Graduated payment mortgages d. Shared equity mortgages
c. Graduated payment mortgages
When a buyer obtains a loan for the purpose of financing the purchase of real property, how does the amount of the loan obtained appear on the Closing Disclosure? Select one: a. As a credit to the buyer and a debit to the seller. b. As a debit to the seller and a credit to the buyer. c. As a credit to the seller, only. d. As a credit to the buyer, only.
d. As a credit to the buyer, only. The selling price of the property is debited (charged) to the buyer and credited to the seller. The amount of the loan is CREDITED to the buyer ONLY. This number (the loan amount) does not appear on the sellers side of the settlement sheet. In the same vein, the amount necessary to pay off the existing mortgage loan is DEBITED (charged) against the seller and does not appear on the buyers side.
Which of the following is NOT essential to the validity of a mortgage? Select one: a. Debtor. b. Attorney. c. Creditor. d. Pledge of property.
A mortgage is a pledge of property as security for the money borrowed by the mortgagor (debtor) from the mortgagee (creditor). Although usually involved, an attorney is NOT required to create a mortgage. The correct answer is: Attorney.
John is buying a house from Ellen for $100,000. National Bank is going to loan John $70,000 and Ellen is going to hold a purchase money mortgage in the amount of $10,000 and John will pay the difference in cash. The $10,000 owed to Ellen can be described as: Select one: a. Participation mortgage. b. Junior mortgage. c. Senior mortgage. d. First mortgage.
Ellen, the seller, holds a junior mortgage or a second deed of trust since the senior mortgage or first mortgage will be held by the bank. The correct answer is: Junior mortgage.
The current interest rate for U.S. Treasury Bills might affect the interest rate of an adjustable rate mortgage: Select one: a. Under no circumstances. b. In every case. c. If the Treasury Bill rate is used as the index rate. d. If the borrower challenges the interest rate of the loan.
If the index rate of the ARM is based on the Treasury Bill rate, then the rate of the mortgage will go up or down due to changes in the rate for Treasury Bills. The correct answer is: If the Treasury Bill rate is used as the index rate.
In a trust deed loan, which of the following statements is correct? Select one: a. The trustor makes the monthly payment to the trustee. b. The beneficiary makes the monthly payment to the trustor. c. The beneficiary makes the monthly payment to the trustee. d. The trustor makes the monthly payment to the beneficiary
In a trust deed loan the borrower is the trustor and makes the monthly payment to the beneficiary who is the lender. The correct answer is: The trustor makes the monthly payment to the beneficiary.
Who holds the security in a deed of trust? Select one: a. The trustor. b. The mortgagor. c. The beneficiary. d. The trustee.
In this question we are talking about a deed of trust, NOT a mortgage. The security is held by a neutral third party known as the trustee. With a deed of trust, the mortgagor (borrower) is called the trustor and the mortgagee (lender) is called the beneficiary. The correct answer is: The trustee.
Each of the following statements about reverse mortgages is true, EXCEPT: Select one: a. The lender typically makes monthly payments to the borrower b. The loan must be repaid upon the death of the borrower or sale of the property c. The loan would become due and payable upon the death of the borrower d. The minimum age requirement for a reverse mortgage is 65 years old
The FALSE statement is that the minimum age requirement is 65. The actual minimum age is 62.
The truth-in-Lending Act would not apply to a loan for? Select one: a. the purchase of a vacant lot on which a single-family residence will be constructed. b. the purchase of a $20,000 farm. c. the purchase of a family-owned jewelry store. d. the purchase of a $250,000 residence.
The Truth-in-Lending Act does not apply to the purchase of a family-owned jewelry store since that is a commercial loan. The correct answer is: the purchase of a family-owned jewelry store.
Which clause in a mortgage loan would allow the lender to foreclose to recover the entire remaining loan balance if the borrower defaults on the loan? Select one: a. The defeasance clause b. The subordination clause c. The acceleration clause d. The alienation clause
The acceleration clause declares the entire loan balance to be due and payable upon the borrower's default. Without this clause the lender could only pursue the past due payments if the borrower stops making the payments.
A seller sells her home to a buyer who assumes her existing loan. If the buyer defaults, who is responsible for the balance of the debt? Select one: a. Seller only b. Buyer only c. Seller and buyer jointly d. Seller and buyer jointly and severally
When the buyer "assumes" the existing loan of the seller, the seller remains a co-maker on the note with the buyer, thus both the seller and the buyer are jointly (both) and severally (individually) liable to the lender for the debt, unless the seller is able to get a release of liability from the lender, which this question did not specify. The correct answer is: Seller and buyer jointly and severally
Bill takes out an adjustable rate mortgage which has a payment cap whereby he can make a specified minimum payment which does not pay all of the interest due that month. If Bill uses that option, which of the following is the result: Select one: a. Negative amortization b. Default c. A reduced interest rate for that month d. An extension of the maturity date of the loan
a. Negative amortization If the loan payment does not at least pay the full interest charge for the month, the unpaid interest charges are added to the loan balance, which is called negative amortization.
Which of the following may be itemized as a personal deduction when paying Federal income taxes? Select one: a. The amount of interest paid on a home mortgage. b. The amount of principal paid on a home mortgage. c. The cost of installing a fence around a residence. d. The cost of homeowner's insurance.
a. The amount of interest paid on a home mortgage. When you itemize deductions on your income tax return, you may NOT deduct the cost of home improvements or insurance premiums. Only the interest portion of your mortgage payments are deductible NOT the amount that is applied to the principal balance of the loan.
FHA's role in the real estate mortgage market is best described as: Select one: a. A lender to the consumer. b. An insurance company. c. A secondary mortgage market warehouse. d. A mortgage banker.
b. An insurance company.
A subdivision developer obtained a construction loan to build new houses on 20 lots. What type of clause would he request so that individual lots could be unencumbered as the loan amount is paid down? Select one: a. Subordination. b. Partial release. c. Exculpatory. d. Safety.
b. Partial release. A partial release clause would allow the lien on one of the lots to be released each time a specified amount of the loan is repaid when a lot is sold.
As a general rule, VA loans are fixed rate, fixed term loans. What would cause the monthly payment of a VA loan to increase? Select one: a. If there was an increase in the Consumer Price Index. b. An increase in the interest rates allowed for VA loans. c. An increase in the assessed value of the property. d. None of the above, the payment cannot chang
c. An increase in the assessed value of the property .VA loans are fixed rate for a fixed term, so any change in the CPI or allowed interest rates would have no effect on the payments. However, all VA loan monthly payments must include the principal, interest and 1/12th of the taxes and the hazard insurance (PITI). If the assessed value of the property goes up, the real estate taxes will also increase causing the monthly payment to increase accordingly.
A lender has been accused of violating a state's usury laws. This accusation would necessarily involve: Select one: a. Disintermediation. b. Redlining. c. Charging excessive interest rates. d. Any of these choices.
c. Charging excessive interest rates.
If a veteran has an existing VA loan, under which of the following circumstances could he or she obtain another VA loan? Select one: a. If the first loan has been paid in full and the property sold. b. If the first loan is assumed by a qualified veteran buyer and the buyer's eligibility is substituted for the seller's. c. If the first loan is more than 5 years old. d. Either the earlier loan was fully repaid or assumed by another veteran with a substitution of eligibility.
d. Either the earlier loan was fully repaid or assumed by another veteran with a substitution of eligibility.
Which of the following statements is true relative to Regulation Z? Select one: a. It prohibits discrimination. b. It requires the use of a Closing Disclosure for closing. c. It requires full disclosure of all financing terms regardless of the type of financing offered. d. It requires disclosure of the APR.
d. It requires disclosure of the APR.
When conducting a closing, the settlement agent is responsible for all of the following, EXCEPT: Select one: a. Collecting all legal documents and funds pertaining to the closing of the transaction b. Obtaining all information relevant to the marketability of the title c. Paying the net proceeds of the sale to the seller d. Payment of the commission to the listing salesperson
d. Payment of the commission to the listing salesperson The settlement agent is responsible to see that the necessary documents such as the deed and mortgages are in order; that the required funds from buyer and lender are available; and that the necessary title search has been completed and are at closing in order to close the transaction in accordance with the contract provisions. The settlement agent pays the BROKER any commission due and the BROKER pays the salesperson.
The HUD 1 lists all of the following EXCEPT? Select one: a. The sales price. b. The earnest money deposit. c. The broker's commission. d. Price the seller originally paid for the property.
d. Price the seller originally paid for the property. The HUD-1 form would list all of the money that came into and was paid out from the closing of the sale. The price originally paid would not be a part of that transaction.
Who holds the security for a mortgage loan? Select one: a. The grantor b. The grantee c. The mortgagor d. The mortgagee
d. The mortgagee The security for the loan is the real property which is pledged in the mortgage document. The mortgage document is held by the mortgagee (lender).
If the mortgagor is in default on their mortgage payments, what is the legal process available to the mortgagee to collect? Select one: a. The mortgagee would obtain a power of attorney. b. The mortgagee would obtain an estoppel certificate. c. The mortgagee would obtain a satisfaction piece. d. The mortgagee would obtain a judgment causing foreclosure.
d. The mortgagee would obtain a judgment causing foreclosure.
Which of the following persons executes a trust deed? Select one: a. Trustee. b. Trustor. c. Mortgagee. d. Beneficiary.
the trustor is the borrower in a deed of trust. He executes (signs) the trust deed (deed of trust) granting "naked title" to the trustee who holds this title to assure payment of a debt to the beneficiary (lender). The correct answer is: Trustor.
On an FHA insured loan, the money is provided by: Select one: a. The Federal Housing Administration. b. Qualified lending institutions. c. The FDIC. d. The Federal Treasury.
b. Qualified lending institutions.
A homeowner spends $40,000 installing a luxurious kitchen in his home. When the property is sold, the homeowner finds that the kitchen only added $25,000 to the value of the home. This illustrates the principle of: Select one: a. Change b. Unearned increment c. Regression d. Contribution
d. Contribution The answer is contribution. The principle of contribution states that the value of feature is determined by what buyers are willing to pay for the feature, not the cost of installing it.
Harry is buying Sally's house and wants to assume her existing loan. Harry should have Sally request a(n): Select one: a. Payoff estimate b. Reduction certificate c. Escrow analysis d. Satisfaction of mortgage
b. Reduction certificate A reduction certificate would show the current status of the loan, including the current loan balance.
Under the Equal Credit Opportunity Act, which of the following statements is FALSE? Select one: a. Persons relying on public assistance cannot be discriminated against in lending b. The ECOA prohibits discrimination in lending and in housing c. A lender who denies credit to an individual must disclose the reason for the denial within 30 days d. None of these statements is false
b. The ECOA prohibits discrimination in lending and in housing The ECOA prohibits discrimination in lending, but not in housing. The Fair Housing Act prohibits discrimination in housing.
A lender on a first mortgage has been offered a deed in lieu of foreclosure by the defaulting borrower. Would the lender want to know about any junior loans against the property? Select one: a. Yes, because it gives the lender a measure of how responsible the borrower has been in managing debt b. Yes, because the lender would have to make the payments on any junior loans c. No, because the lender on the first mortgage would have priority over any other loans d. No, because the borrower would be expected to continue making payments on any junior loan
b. Yes, because the lender would have to make the payments on any junior loans
In a home loan using a trust deed, who holds naked legal title to the property? Select one: a. The trustor. b. The beneficiary. c. The intermediary. d. The trustee.
d. The trustee.
Which of the following statements is true regarding defaulting borrower's right to redeem the property after the foreclosure sale for a period of time by repaying the lender the full amount due on the loan? Select one: a. This is known as the equity of redemption and applies to judicial foreclosures only b. This is known as a statutory redemption right and applies to nonjudicial foreclosures only c. This is known as the equity of redemption and applies to nonjudicial foreclosures only d. This is known as a statutory redemption right and applies to judicial foreclosures only
d. This is known as a statutory redemption right and applies to judicial foreclosures only
What document would be recorded to eliminate the lien of a trust deed loan? Select one: a. A satisfaction of trust deed b. A satisfaction of mortgage c. A reconveyance deed d. A lien release
c. A reconveyance deed
Which of the following statements is most accurate regarding how discount points are listed on a closing statement in the purchase of a home? Select one: a. They would always be a debit to the buyer b. They would always be a debit to the seller c. They would most likely be a debit to the seller d. They would most likely be a debit to the buyer
d. They would most likely be a debit to the buyer Usually the buyer pays the discount points on a loan but through negotiation the seller could agree to pay the discount points.
A lender adds some additional charges to the monthly payment for the reserve or escrow account. The purpose of this charge is to: Select one: a. Increase the interest yield to the lender b. Create a buffer in case the borrower misses a payment c. Comply with the Real Estate Settlement Procedures Act d. To ensure payment of property taxes and insurance
d. To ensure payment of property taxes and insurance The reserve account (or escrow account or impound account) allows funds to be set aside to ensure payment of the property taxes and insurance. When the payments fall due, the lender or servicer will pay those costs from the reserve fund.
Which of the following statements is NOT correct? Select one: a. Prepayment penalties are prohibited with VA and FHA financing. b. HUD establishes market-based interest rates for VA and FHA loans. c. VA can make certain direct loans. d. Conventional loans may require PMI insurance.
he FALSE statement is that HUD establishes market-based interest rates for VA and FHA loans. Interest rates on FHA and VA loans are set by lenders as determined by the market. The correct answer is: HUD establishes market-based interest rates for VA and FHA loans.
What document would be recorded to eliminate the lien of a trust deed loan? Select one: a. A satisfaction of trust deed. b. A satisfaction of mortgage. c. A reconveyance deed. d. A lien release.
c. A reconveyance deed.
In which of the following sequences would the listed documents be recorded? Select one: a. Buyer's mortgage, seller's satisfaction of mortgage, seller's deed to buyer b. Seller's deed to buyer, seller's satisfaction of mortgage, buyer's mortgage c. Seller's satisfaction of mortgage, seller's deed to buyer, buyer's mortgage d. Seller's satisfaction of mortgage, buyer's mortgage, seller's deed to buyer
c. Seller's satisfaction of mortgage, seller's deed to buyer, buyer's mortgage First the seller's satisfaction of mortgage would be recorded to remove the mortgage lien. Then the seller's deed to buyer would be recorded to transfer title to the buyer. Lastly, the buyer's mortgage would be recorded to secure the new loan.
ed and Alice are married and bought a house three years ago for $200,000. Two years later they moved out of the house and rented it out on a one-year lease. At the expiration of the lease they sold the house for $300,000. What is the taxable long-term gain on sale of the property? Select one: a. $100,000 because they did not own the house for five years b. $100,000 because the house had been rented when they sold it c. $0 because long-term gains on a personal residence are never taxable d. $0 because they used it for a personal residence for two of the last five years
d. $0 because they used it for a personal residence for two of the last five years For a married couple who lived in the property for 2 of the last 5 years the first $500,000 of capital gains is exempt from taxation. Since they had only $100,000 of capital gains, it is tax-free in its entirety.
Which of the following loans could also be referred to as an interim loan? Select one: a. A mortgage which matures in less than 30 years. b. A graduated payment mortgage. c. A purchase money mortgage. d. A construction loan.
A construction loan is also called an interim loan because it is a short term loan until the construction is completed. The correct answer is: A construction loan.
The certificate that shows the unpaid balance of a mortgage and the amount of unpaid interest associated with that debt is referred to as: Select one: a. A waiver. b. An estoppel. c. An acknowledgment. d. A satisfaction.
A satisfaction is the certificate, issued by the lender after the entire mortgage is paid, stating that the debt has been satisfied. It is the ESTOPPEL certificate that provides the information referred to in the stem of the question. The correct answer is: An estoppel.
In a trust deed loan, which of the following statements is correct? Select one: a. The trustor makes the monthly payment to the trustee. b. The beneficiary makes the monthly payment to the trustor. c. The beneficiary makes the monthly payment to the trustee. d. The trustor makes the monthly payment to the beneficiary.
In a trust deed loan the borrower is the trustor and makes the monthly payment to the beneficiary who is the lender. The correct answer is: The trustor makes the monthly payment to the beneficiary.
The person or firm who collects the monthly payments and keeps records regarding a mortgage loan is called a(n): Select one: a. Loan officer b. Loan originator c. Underwriter d. Loan servicer
The loan servicer collects the monthly payments and keeps records. It would also handle the foreclosure in the event of a default.
Which of the following instruments shows evidence of a debt? Select one: a. Note b. Option c. Contract d. Abstract
The promissory note, which a borrower signs with a mortgage or deed of trust, shows legal evidence of the debt (the money borrowed). The correct answer is: Note
Which of the following persons executes a trust deed? Select one: a. Trustee. b. Trustor. c. Mortgagee. d. Beneficiary
The trustor is the borrower in a deed of trust. He executes (signs) the trust deed (deed of trust) granting "naked title" to the trustee who holds this title to assure payment of a debt to the beneficiary (lender). The correct answer is: Trustor
Larissa purchased a home for $200,000 and took out a mortgage loan with a 90% loan to value ratio. If she was charged 2 loan points when the loan was originated, how much money did she pay in points? Select one: a. $2,800 b. $3,200 c. $3,600 d. $4,000
c. $3,600 $200,000 x .90 = $180,000. $180,000 x .02 = $3,600.
A lender has conducted a foreclosure sale after a loan default but the sale proceeds were insufficient to repay the debt. The lender gets a judgment from the court ordering the borrower to repay the remaining loan balance. This is an example of a(n): Select one: a. Insufficiency order b. Specific lien c. Deficiency judgment d. Repayment judgment
c. Deficiency judgment
Which of the following statements about a mortgage loan is correct? Select one: a. The mortgagee holds legal title b. The mortgagor has a lien on the property c. The mortgagor makes monthly loan payments to the mortgagee d. The mortgagee receives the loan proceeds
c. The mortgagor makes monthly loan payments to the mortgagee
An appraiser has estimated the value of a property according to the comparison approach, the cost approach and the income approach. To reach a final value estimate the appraiser will: Select one: a. Average the three values b. Choose one of the three values c. Differentiate the three values d. Reconcile the three values
d. Reconcile the three values
Which of the following clauses would prevent a mortgage from being assumed by a subsequent buyer? Select one: a. Condemnation clause b. Defeasance clause c. Due-on-sale clause d. Right of first refusal clause
the due-on-sale clause, legally referred to as the alienation clause, allows the lender to demand immediate payment of the entire debt if the title to the property is transferred (sold). This would prevent an assumption without lender approval. The correct answer is: Due-on-sale clause
