#7- Financing Progress Exam 1

As a condition of granting a loan, a lender will often charge discount points. Which statement is not correct concerning discount points? A. FHA and VA regulations forbid the lender to charge discount points when their agencies insure or guarantee the loan. B. If a lender charged 6 discount points on a 6-3/4% loan, the effective interest rate would be approximately 7-1/2%. C. Discount points are considered an interest expense. D. In a tight money market the number of discount points demanded by lenders tends to increase.

A. FHA and VA regulations forbid the lender to charge discount points when their agencies insure or guarantee the loan.

Assume a husband and wife are going to purchase a piece of real property. Which of the following would carry the least weight in granting the loan for the purchase of the property? A. Husband's overtime pay B. Wife's salary C. Amount of the down payment D. The appraisal of the property

A. Husband's overtime pay

A man purchased a residence for $125,000. He deposited $115,000 cash, and a note secured by a deed of trust for the balance of the purchase price. Three years after the closure of escrow he executed a second deed of trust on the property to secure a loan he used to purchase an automobile. Considering the above facts which is a correct statement? A. The beneficiary of the first trust deed may foreclose in the event of default but has no recourse to a suit for a deficiency B. The beneficiary on the second deed of trust may not sue for a deficiency judgment because it is classified as a purchase money trust deed C. Both beneficiaries have the right of foreclosure and to sue for any deficiency they suffer D. Neither beneficiary has any right to sue after the foreclosure as they have received their full rights under a trust deed relationship

A. The beneficiary of the first trust deed may foreclose in the event of default but has no recourse to a suit for a deficiency

A hard money loan is one made in exchange for: A. cash. B. property. C. a novation. D. a deed.

A. cash.

Nonpayment of a debt is called: A. default. B. defeasance. C. deficiency. D. defray.

A. default.

In real estate, reserves is another name for: A. impounds. B. assessment tax overpayment. C. escrow account. D. trust account.

A. impounds.

What is a junior loan? A. A loan recorded before a first deed of trust or mortgage B. A loan recorded after a first deed of trust or mortgage C. A loan made by a mortgage broker D. A loan made by a minor

B. A loan recorded after a first deed of trust or mortgage

Which of the following are synonymous? A. Take-out loan and construction loan B. Construction loan and interim loan C. Interim loan and take-out loans D. Construction loan and open end loan

B. Construction loan and interim loan

What clause is used to change the priority of a financial instrument? A. Alienation clause B. Subordination clause C. Or more clause D. Acceleration clause

B. Subordination clause

What is a swing loan? A. Long term loan B. Temporary equity loan C. Construction loan D. Loan using playground equipment as security

B. Temporary equity loan

Of the following, which is a correct statement concerning a junior mortgage? A. The holder of a second mortgage may not record a request for notice of default until the holder of the first mortgage has recorded his notice of default. B. The holder of a junior mortgage would most likely make the payments for the mortgagor on a delinquent first mortgage and start his own legal proceedings. C. A second mortgage is always classified as purchase money mortgage. D. The holder of a second mortgage may not bid on his own foreclosure sale.

B. The holder of a junior mortgage would most likely make the payments for the mortgagor on a delinquent first mortgage and start his own legal proceedings.

Which of the following does not apply to a mortgage? A. Contract B. Trustee C. Note D. Hypothecation

B. Trustee

The Federal National Mortgage Association (Fannie Mae) was created under Title III of the National Housing Act for the purpose of: A. lending money on Title II loans when the bank will not. B. buying Title II loans to keep the market sound. C. buying Title I home improvement loans. D. none of the above

B. buying Title II loans to keep the market sound.

A trustee's sale is related to: A. yard sale. B. foreclosure. C. installment sale. D. deficiency judgment

B. foreclosure.

A written promise to pay or evidence of a debt is called a: A. deed of trust. B. promissory note. C. mortgage. D. deed.

B. promissory note.

A veteran applies for a loan to purchase a home. He requests that the loan be processed as a guaranteed loan by the Department of Veterans Affairs. A VA appraiser, in processing the CRV for the loan, would be most concerned with: A. the credit rating of the borrower. B. the neighborhood in which the home is located. C. the loan to value ratio of the requested loan. D. the veteran's access to additional funds.

B. the neighborhood in which the home is located.

The maximum FHA and VA loan amounts: A. may not be changed. B. vary in different regions of the country. C. are the same everywhere. D. depend on the buyer.

B. vary in different regions of the country.

Which of the following statements is incorrect? A. A reconveyance deed is signed by the trustee. B. A trustee's deed is signed by the trustee. C. A deed of trust is signed by the trustee. D. A note secured by a deed of trust is signed by the trustor.

C. A deed of trust is signed by the trustee.

Of the following loans, which loan never requires the borrower to pay discount points? A. FHA B. VA C. Cal-Vet D. Conventional

C. Cal-Vet

Which loan is dissimilar from the others? A. VA B. Cal-Vet C. Conventional D. FHA

C. Conventional

Which of the following does not belong with the others? A. CRV B. Highest loan-to-value ratio C. FHA D. No down payment

C. FHA

Which of the following statement does not belong with the others? A. Not insured by a governmental agency B. Higher interest rate C. FHA loan D. Conventional loan

C. FHA loan

Notes are said to be negotiable and non-negotiable. Which of the following best defines a negotiable note? A. If it is endorsed without recourse it is non-negotiable. B. An alienation clause in the note would make it non-negotiable. C. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable. D. To be negotiable a note must be endorsed by the maker.

C. If a note is secured by a mortgage the note is negotiable but the mortgage is non-negotiable.

What type of contract does a veteran receive in a Cal-Vet purchase? A. Trust deed B. Mortgage C. Land contract D. Any of the above

C. Land contract

What provides the most security to the lender of a junior loan? A. Prepayment penalty B. Notice of default C. Loan to value ratio D. Request for foreclosure

C. Loan to value ratio

Mortgage markets are classified as primary and secondary markets. Of the following statements concerning these markets, which is correct? A. Secondary financing is generally obtained in the secondary market. B. A lender wishing to reduce its holding of FHA and VA loans would probably sell them on the primary mortgage market. C. Mortgage companies are primarily engaged in the primary market D. Lenders in the primary mortgage market are not permitted to engage in secondary mortgage market. activities

C. Mortgage companies are primarily engaged in the primary market

Of the following, which is a correct statement concerning the promissory note and mortgage? A. The mortgage is worthless without the promissory note. B. The mortgage is negotiable in the ordinary course of business. C. The promissory note is the instrument used to bring a deficiency action to court. D. A promissory note is non-negotiable in the secondary mortgage market.

C. The promissory note is the instrument used to bring a deficiency action to court.

In a deed of trust, which of the following is the borrower? A. Grantor B. Mortgagor C. Trustor D. Trustee

C. Trustor

In purchasing a house, which of the !Mark For Review following methods of financing could be accomplished without a down payment? A. FHA B. Cal-Vet C. VA D. Conventional

C. VA

A hard money loan is: A. a loan of money when money is hard to get. B. a loan made to the trustor to help him purchase a piece of real property. C. a loan of cash to an existing owner of real property to buy an automobile. D. none of the above

C. a loan of cash to an existing owner of real property to buy an automobile.

A seasoned loan in a lender's portfolio would indicate: A. the time of year it was made. B. the maturity date. C. an established record of prompt payments. D. the date after first payment is made.

C. an established record of prompt payments.

A purchase money loan is a(n): A. loan received from a mortgage broker. B. equity loan. C. loan made at the time of the sale whose proceeds go to the seller. D. loan whose proceeds go to the buyer.

C. loan made at the time of the sale whose proceeds go to the seller.

FHA uses MPR in connection with loans they insure. MPR means: A. maximum percentage rate. B. minimum percentage rate. C. minimum property requirement. D. maximum property requirement.

C. minimum property requirement.

The lender under a mortgage is called: A. mortgagor. B. grantor. C. mortgagee. D. assignee.

C. mortgagee.

To bring current and restore is to: A. pledge. B. usury. C. reinstate. D. redeem.

C. reinstate.

What kind of a promissory note has an interest rate that varies upward or downward over the term of the loan? A. Straight note B. Partially amortized installment note C. Fully amortized installment note D. Adjustable note

D. Adjustable note

Which type of government financing insures lenders against loss? A. VA B. HUD C. Conventional D. FHA

D. FHA

Land contracts, also referred to as installment contracts, are commonly used when the purchaser does not have sufficient cash to take title and pay the balance of the purchase price. Of the following, which is a correct statement concerning a land contract? A. It normally involves a third-party lender. B. A purchaser may never assign his interest in the property prior to full payment of the purchase price. C. An agreement prohibiting the recording of the contract is enforceable. D. It is a security instrument.

D. It is a security instrument.

Of the following, which is a correct statement concerning a deed of trust and note? A. The deed of trust is held by the trustee. B. The deed of trust is acknowledged by a notary public. C. The beneficiary holds naked legal title; however, the trustee has the power of sale. D. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender.

D. The trustor to beneficiary relationship is not a fiduciary relationship but merely that of a borrower and lender.

Another name for a wrap-around mortgage is: A. swing loan. B. shared appreciation loan. C. reverse annuity loan. D. all inclusive trust deed.

D. all inclusive trust deed.

A real estate financing device that a seller can use to transfer equitable title to a buyer is known as: A. a land sales contract. B. a contract of sale. C. a conditional sales contract. D. all of the above

D. all of the above

Article 7 of the Real Estate Law provides that interest on a loan may not be charged: A. prior to the date of the note. B. until the proceeds of the loan have been made available to the borrower. C. until the proceeds of the loan have been deposited in escrow. D. all of the above are requirements of Article 7

D. all of the above are requirements of Article 7

The buyer under the terms of a land contract is referred to as: A. vendee. B. equitable title owner. C. purchaser. D. all of the above.

D. all of the above.

A subordination clause: A. is of primary benefit to the lender. B. would prevent the sale of a property subject to the existing loan unless it were waived by the lender. C. would be of no value in a second mortgage as it is presently in a subordinate position. D. is very often used in the purchase of raw land by a builder.

D. is very often used in the purchase of raw land by a builder.

When there is more than one borrower on a promissory note, the lender will include the term: A. due on sale. B. power of sale. C. no grace period. D. jointly and severely.

D. jointly and severely.

Mr. Dunn purchsed his home from Mr. Spring using seller carry-back financing. Later, Mr. Kirk bought the property subject to the loan. If Mr. Kirk immediately defaulted, Mr. Spring: A. may get a deficiency judgment against Mr. Dunn. B. may get a deficiency judgment against Mr. Kirk. C. may get a deficiency judgment against Mr. Dunn and Mr. Kirk. D. may not get a deficiency judgment because it was a purchase money loan.

D. may not get a deficiency judgment because it was a purchase money loan.

A borrower on a new loan is required to advance $412.00 for an escrow account. He would do so for the benefit of: A. the mortgagor only. B. the mortgagor and the mortgagee. C. Fannie Mae. D. the mortgagee, primarily.

D. the mortgagee, primarily.

A deed of trust is the most common method of financing the purchase of real property in California. All of the following are correct statements concerning a trust deed except: A. the chief purpose of a trust deed is to create a lien. B. a trust deed may be foreclosed without court action or approval. C. a trust deed has no redemption period. D. the promissory note is held by the beneficiary as his prime security for the loan.

D. the promissory note is held by the beneficiary as his prime security for the loan.

In searching the files of the county recorder's office, you could most likely tell a first mortgage from a second mortgage by: A. reading of the document. B. information received from the recorder. C. reading the contents of the document. D. time and date of recording.

D. time and date of recording.

The power of sale is given to the trustee by the: A. beneficiary. B. seller. C. vendor. D. trustor.

D. trustor.