Chap 9, real estate

An investor borrowed $100,000 to be repaid as follows: $10,000 at the end of the 1st, 2nd, 3rd, and 4th years, and $60,000 at the end of the 5th year. The interest rate was as follows: 10.5% for the 1st year, 11% for the 2nd year, 11.5% for the 3rd year, 12% for the 4th year, and12.5% for the 5th year. How much interest did he pay?

45,000

Regarding the use of a mortgage, which of the following statements is correct? A. A mortgage is evidence of a borrower's debt to a lender. B. A mortgage hvpothecates property as collateral for a loan. C. A mortgage must reference an earnest money agreement when serving as collateral for a loan. D. An owner may not occupy mortgaged property

A mortgage hvpothecates property as collateral for a loan.

Allows the lender to declare the loan due if the borrower defaults.

Acceleration Clause

Allows the lender to demand immediate payment of the entire loan if the borrower defaults.

Acceleration Clause

A clause in a mortgage that allows the lender to call the loan due if the property changes ownership; also known as a due on sale clause

Alienation clause

The buyer personally obligates himself to repay an existing mortgage loan as a condition of the sale

Assumption

Who may be held responsible for mortgage loan repayment when a loan is assumed as part of a real estate sale? A. Purchaser only B. Seller only C. Both the purchaser and the seller D. Agent, only if there is a default

Both the purchaser and the seller

A document wherein personal property is used as security for a promissory note

Chattel mortgage

A clause in a mortgage whereby the borrower agrees to keep mortgaged property adequately insured against destruction

Covenant of insurance

Bidders pay more at a foreclosure sale if the property is located in a state which A. has a short statutory redemption period. B. has a lengthy statutory redemption period. C. permits the mortgagee to occupy the property during the statutory redemption period. D. gives title and possession to the high bidder immediately following the foreclosure auction.

D. gives title and possession to the high bidder immediately following the foreclosure auction.

The period of time set by state law after a foreclosure sale, during which the mortgagor may redeem the property is known as the period of A. equitable redemption. B. legal redemption. C. voluntary redemption. D. statutory redemption.

D. statutory redemption.

A deed given to a trustee as a security for a loan

Deed of trust

A judgment against a borrower if the sale of mortgaged property at foreclosure does not bring in enough to pay the balance owed.

Deficiency Judgment

A loan on which the borrower is behind his payments

Delinquent loan

An agreement that is considered to be a mortgage in its intent even though it may not follow the usual mortgage wording

Equitable mortgage

The borrower's right, prior to the day of foreclosure, to repay the balance due on a delinquent loan

Equity of redemption

Any mortgage lower than a first mortgage in priority

Junior mortgage

N wishes to purchase W's house for $100,000, giving her a $20,000 cash down payment and a note and mortgage for the remaining $80,000. N can expect to hypothecate which of the following with a mortgage? A. Lot and house B. House, but not the lot C. Lot, but not the house D. N's other real estate holdings

Lot and house

a person who signs a promissory note

Maker

A real estate borrower who is behind in his loan payments would first take which of the following steps? A. Sell the property before the next loan payment is due. B. Wait for the lender to accelerate the loan. C. Wait for the statutory redemption period. D. Meet with the lender as soon as possible.

Meet with the lender as soon as possible.

A document that makes property security for the repayment of a debt.

Mortgage

Normally, which of the instruments associated with a mortgage loan is recorded in the pub- lic records? A. Promissory note C. Purchase contract B. Mortgage D. Bill of sale

Mortgage

One who gives a mortgage, the borrower

Mortgagor

Given a choice of foreclosure methods, in a simple and straightforward case, a lender will usually prefer which method of loan foreclosure? A. Judicial B. Nonjudicial C. Partition suit D. Reconveyance suit

Nonjudicial

Release of a portion of a property from a mortgage

Partial release

A clause in a mortgage that gives the mortgagee the right to conduct a foreclosure sale without first going to court

Power of sale

The evidence of debt; contains amount owed, interest rate, repayment schedule, and a promise to repay

Promissory note

The usual procedure by which foreclosed properties are sold

Public auction

Discharge of a mortgage upon payment of the debt owed

Satisfaction of mortgage

The right of a borrower, after a foreclosure sale, to reclaim the property by repaying the defaulted loan

Statutory redemption

The buyer of an already mortgaged property makes the payments but does not take personal responsibility for the loan

Subject to

Voluntary acceptance of a lower mortgage priority position than one would otherwise be entitled to

Subordination

E sold his home to W, subject to an existing mortgage loan. W later defaulted on the loan. Which of the following statements is correct? A. The lender has recourse to the assets of W for the balance due. B. W is jointly responsible for the loan balance. C. The mortgagee can look to E for the loan balance. D. E was relieved of liability for the loan balance when W accepted title subject to the exist- ing loan.

The mortgagee can look to E for the loan balance.

When the owner paid off his mortgage loan in full, the lender gave him a satisfaction of mortgage document. Should this instrument be recorded in the public records? A. Yes, because recordation is required by state law. B. Yes, because the records would otherwise indicate that the obligation was still outstanding. C. No, because the mortgage was terminated by the defeasance clause once the debt was paid. D. No, because the note was not recorded in the public records

Yes, because the records would otherwise indicate that the obligation was still outstanding.

The words "or order" in a promissory note make it A. impossible for the lender to transfer the right to collect the note to another party B. a negotiable instrument. C. a debt which can be assumed by another party D. difficult for the lender to foreclose.

a negotiable instrument.

A promissory note which fails to state that it is to be secured by a mortgage or deed of trust is A. a personal obligation of the borrower. C. unenforceable. B. a secured obligafion of the borrower. D. may not be assigned or sold.

a personal obligation of the borrower

M is preparing an offer to buy a lot on which the seller will carry back a mortgage. M wants to build a house on the lot and has applied for a construction loan, but the lender will make the loan only if it can be secured by a first mortgage. This can be accomplished by asking the seller to execute A. an estoppel certificate. B. a release of lien. C. a mortgage reduction certificate. D. a subordination agreement.

a subordination agreement.

Should a borrower fail to make payments when due, the lender may demand immediate payment of the entire balance under the terms of the A. prepayment clause. C. acceleration clause. B. defeasance clause. D. hypothecation clause.

acceleration clause.

All of the following covenants will appear in a mortgage EXCEPT A. to pay taxes and insurance. B. against removal. C. against encumbrances. D. of good repair.

against encumbrances.

The clause which gives the lender the right to call in the note if the mortgaged property is sold or otherwise conveyed by the borrower is known as the A. acceleration clause. B. alienation clause. C. defeasance clause. D. foreclosure clause.

alienation clause.

In a foreclosure action, the lender asks the court for a judgment directing that the A. mortgagor's interests in the property be cut off. B. property be sold at public auction. C. lender's claim be paid from the sale proceeds. D. all of the above be done.

all of the above be done.

When a lender wants to sell a loan to another investor, the borrower may sometimes be asked to verify the loan balance by means of A. a certificate of novation. B. an estoppel certificate. C. a certificate of reduction. D. a subordination certificate.

an estoppel certificate.

If all or part of a mortgaged property is taken by eminent domain, the condemnation clause requires that A. any money received be used to reduce the balance owed on the note. B. the entire loan balance be paid in full. C. the borrower is relieved of further financial responsibility. D. government must pay the note in full before condemnation.

any money received be used to reduce the balance owed on the note.

A borrower who feels mistreated by a power of sale foreclosure can A. obtain a judicial foreclosure. B. appeal the issue to the courts. C. obtain a judgment. D. obtain a lien.

appeal the issue to the courts.

Mortgages which are secured by personal property A. are known as chattel mortgages. B. must be foreclosed by judicial foreclosure. C. are called first mortgages. D. are not allowed in most states.

are known as chattel mortgages.

To be accepted as valid evidence of a borrower's debt, a note must do all of the following EXCEPT A. be in writing, between parties having contractual capacity B. state the borrower's promise to repay a certain sum of money C. show the terms of payment. D. be recorded in the public records.

be recorded in the public records.

In order to be enforceable, a promissory note must be signed by the A. borrower. C. agent. B. lender. D. trustee.

borrower

Under a note secured by a mortgage, the obligor is the A. lender. C. note holder. B. borrower. D. mortgagee.

borrower.

By voluntarily giving the lender a deed in lieu of foreclosure, a delinquent borrower A. can avoid foreclosure proceedings. B. is still responsible for possible deficiency judgments. C. cannot avoid foreclosure proceedings. D. will have to make several additional payments as a prepayment penalty.

can avoid foreclosure proceedings.

When an installment contract to buy real estate goes into default, the A. vendee can rescind the contract. B. contract can be judicially foreclosed. C. vendor will have little legal basis to repossess the property. D. vendee may be liable for a possible deficiency judgment.

contract can be judicially foreclosed.

A clause in a mortgage stating that the mortgage is defeated if the borrower repays the accompanying note on time.

defeasance clause

mortgage becomes null and void when the note is paid in full under the terms of the A. defeasance clause. B. prepayment clause. C. alienation clause. D. hypothecation clause.

defeasance clause.

A judgement against a borrower if the foreclosure sale does not bring enough to pay the balance owned

deficiency judgment

When the amount received from a foreclosure sale is insufficient to pay off the mortgage loan and the other expenses of the sale, the lender may sometimes file for a(n) A. deficiency judgment. B. mechanic's lien. C. estoppel lien D. statutory lien.

deficiency judgment.

The period of equitable redemption given to a borrower A. begins when the loan is made. B. ends when the property is sold at foreclosure. C. ends within a year after the sale. D. is useful during the life of the loan.

ends when the property is sold at foreclosure.

The purpose of putting the location of the execution on a promissory note is to A. establish applicable state laws. B. tell the borrower where to send the payments. C. allow the lender to sell the note out-of-state. D. create a negotiable instrument.

establish applicable state laws.

Most mortgage foreclosures are the result of the borrower's A. violation of mortgage covenants. B. failure to make loan payments on time. C. noncompliance with the terms of the mortgage agreement. D. violation of the alienation clause.

failure to make loan payments on time.

The mortgage loan with highest priority for repayment in the event of foreclosure

first mortgage

The procedure by which a person's property can be taken and sold to satisfy an unpaid debt

foreclosure

A borrower's property serves as collateral while the borrower retains the rights of posses- sion and use of it by the process of A. alienation. C. pledge. B. hypothecation.D. acceleration.

hypothecation

Any mortgage on a property that is subordinate to the first mortgage in priority

junior mortgage

A mortgage which is lower in lien priority than another mortgage on the same property is known as a A. first mortgage. B. junior mortgage. C. senior mortgage. D. promissory note.

junior mortgage.

Under the terms of a mortgage, the mortgagee is the A. obligor under the promissory note. C. trustee. B. lender. C. trustee. D. maker of the note.

lender.

A mortgagee informs the public of a pending foreclosure action by recording a(n) A. acceleration. B. lis pendens. C. estoppel. D. subordination.

lis pendens.

In states which subscribe to the title theory of mortgages, the A. mortgage deeds title of the mortgaged property to the lender. B. borrower forfeits the rights of possession and use of the property C. mortgage is considered a lien on the property. D. title is transferred to the lender only if the borrower defaults.

mortgage deeds title of the mortgaged property to the lender.

The party receiving the mortgage, the lender

mortgagee

The lien priority of mortgages is determined by the A. date of the mortgage instrument. B. date of the promissory note. C. language of the mortgage instrument. D. order of recordation.

order of recordation.

L hypothecated the title to two equally valued properties as collateral for a $50,000 loan. When he had repaid $25,000 of the principal amount, one of the properties was removed from the mortgage obligation by means of a A. mortgage satisfaction. B. partial release. C. defeasance. D. release of mortgage.

partial release.

Allows a mortgagee to conduct a foreclosure sale without first going to court

power of sale

Judicial foreclosure may sometimes be avoided by A. invoking the acceleration clause. B. the trustee who acts as an intermediary between the beneficiary and trustor. C. power of sale and entry and possession. D. beneficiary petitioning for a reconveyance suit.

power of sale and entry and possession.

Allows the borrower to pay more than the required payment

prepayment privilege

A written promise to repay a debt

promissory note

Evidence of the amount and terms of a borrower's debt to a lender is provided by means of a A. Mortgage B. promissorynote C. deed of trust D. first mortgage.

promissory note

When a real estate mortgage is foreclosed, unpaid real estate tax liens against the property A. are cut off. B. become a lien on the personal property of the delinquent mortgagor. C. remain in force against the property D. are added to the purchase price at the foreclosure sale.

remain in force against the property

When a loan is assumed, the A. seller can be relieved of liability by novation. B. buyer need not verify the loan balance with the lender. C. seller can avoid liability by selling "subject to" the mortgage. D. buyer can avoid liability through novation.

seller can be relieved of liability by novation.

The deed given to the purchaser at foreclosure by the sheriff or other officer of the court usually takes the form of a A. general warranty deed. B. quitclaim deed. C. special warranty deed. D. bargain and sale deed.

special warranty deed.

Voluntary acceptance of a lower mortgage priority than one would otherwise be entitled to

subordination