Section 7
Which of the following is true about a home equity line of credit?
A borrower can use the funds as needed, repay them, and borrow them again.
Which of the following describes an encumbrance?
A lien on the property due to an unpaid tax bill
Which of these statements about a buydown is true?
A permanent buydown will cost more than a temporary buydown.
Suzy has lost her job and wasn't able to make last month's mortgage payment. How is her lender most likely to help Suzy stay in her home?
Agreeing to modify her loan
Albert wants to sell his house to his cousin, who's willing to assume his FHA loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?
Alienation clause
Andrea's lender has notified her of its intent to foreclose. Her loan is secured with a deed of trust. What rights does she have to redeem her property?
Andrea can cure the default and reinstate the loan.
Who's the mortgagor in a mortgage?
Borrower
Which of the following statements about liens is true?
Both mechanic's and materialman's liens are junior liens. Junior liens, such as mechanic's and materialman's liens, are liens that are subordinate (aka "junior") either in right or priority to another lien on a property.
The three types of finance instruments that can be used when financing a real estate purchase are the note with mortgage, note with deed of trust, and ______.
Contract for deed
The contract Jack is signing has a clause that protects his assets from a deficiency judgment in case of foreclosure. What is this called?
Exculpatory
Stephanie was having trouble making her mortgage payments. Now her payments are lower than they were, and she's able to pay them each month. This is because her lender ______.
Gave her a loan modification
Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?
Her rate will be 3% for the first year, 4% the second year, and 5% after that.
Morris still owes his lender for the financing obtained in purchasing his home. Several years later, Morris took out a home equity line of credit. This means that ______.
If Morris is foreclosed on, the home equity line of credit won't be paid until Morris's first loan is paid off
In California, how has state law modified the way the deed of trust works?
It creates a lien on the property, and the borrower, not the trustee, holds legal title.
Which of the following describes a mechanic's lien?
It's a specific involuntary lien.
What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?
Late charge
In a deed of trust, who is the beneficiary?
Lender
Victor is selling his property to Sheila. He's acting as the lender, and the property is unencumbered. Which of the following options describes the type or types of financial instruments Victor may use for the loan agreement?
Note with a contract for deed, mortgage, or a note with a deed of trust
A beneficiary, trustor, and trustee are the parties involved when the finance instrument is a ______.
Note with deed of trust
A property has just been foreclosed on. Which of the following describes the rules regarding lien priority?
Property tax liens take priority, with all others following a "first in time" rule.
Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?
Reconveyance
Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?
Request a novation
Travis made the final payment on his loan according to the loan terms. What must the note holder do to acknowledge that the debt has been repaid?
Sign the note, mark it "paid in full," and return it to Travis. When the note has been paid off, the holder must sign the note, mark it as paid in full, and return it to the maker. The satisfaction of mortgage is recorded with the county land office, removing the associated lien from the property.
Which of the following features is shared by the mortgage and the deed of trust?
The borrower is required to maintain the property and pay property taxes and insurance.
How is a loan assumption documented?
The buyer and seller both sign an assumption agreement.
Who's the mortgagee in a mortgage?
The lender
Which of the following is a true statement about when a promissory note is sold?
The promissory note is endorsed to the new owner of the loan.
What is a statutory right of redemption?
The right of a borrower to redeem the property by paying amounts owed plus costs, even after the foreclosure sale
When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?
The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.
Rich wants to add a room to his house, so he takes out a home equity loan. This creates a(n) ______ lien.
Voluntary and specific
Brandon's home has been foreclosed on. He had an outstanding loan balance of $145,000, which he owed to his lender, XYZ Lending for a loan taken out in 2009. There's also a lien against the property recorded in 2014 for an unpaid student loan of $25,000, and a HELOC established in 2012 of $30,000, of which he'd used $10,000. If his foreclosure nets $150,000, how much will each creditor be paid?
XYZ Lending will receive $145,000, the HELOC lender will receive $5,000, and the lien holder for his student loan will not be repaid.
Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?
Note with deed of trust
