Chapter 14 (Finance)

In a loan agreement, the instrument that serves as evidence of the debt is known as the: a. Security Deed b. Trust Deed c. Promissory Note D. Mortgage

C. Promissory Note

Stone purchased farm land from Fowler with the idea of developing it. Fowler took part payment in cash and the balance in the form of a note and mortgage. Which of the following clauses did Stone insist on including in the security instrument? A. Alienation B. Subrogation C. Escalation D. Subordination

D. Subordination

Which of the following loans would be covered by Regulation Z? a. A loan to purchase a $20,000 car b. A purchase money mortgage for $125,000 for the purchase of a duplex. c. A loan for $375,000 made for the purpose of purchasing a farm d. A loan of $215,000 to a builder for construction of a single family residential home.

a. A loan to purchase a $20000 car

In Georgia, a borrower seeking a VA loan would probably apply to: a. A local lending institution b. The Veterans Administration c. The Federal Housing Authority d. HUD

a. A local lending institution

In a nonjudicial foreclosure state, before a lender can sell a property that has been foreclosed, the lender must: a. Advertise this sale b. Make necessary repairs c. Have the property inspected d. Evict the occupants

a. Advertise this sale

What is the effect of a loan discount point? a. It increases the lender's yield b. It reduces the amount of closing costs that can be charged c. It increases the price paid for the loan by FMNA d. It reduces the cost of the loan to the borrower

a. It increases the lender's yield

The clause, included in the security instrument, that allow a lender to foreclose on a delinquent borrower without taking the matter to court is known as: a. Power of sale clause b. Defeasance clause c. Redemption clause d. Subordination clause

a. Power of sale clause

Savings deposits in federally chartered banks are insured by the: a. FHA b. FDIC c. FNMA d. MGIC

b. FDIC

Which of the following statements regarding the secondary mortgage market is true? a. it results in borrowers having lower rates on second mortgage market is true? b. It provides a national market where lenders can buy and sell loans, so that money is available when needed for new loans c. It acts as an available source to which borrowers can turn when new loans are not to be found locally d. It is controlled by the government and acts to prevent mortgage fraud and ensure fairness to borrowers

b. It provides a national market where lenders can buy and sell loans, so that money is available when needed for new loans

A subdivision developer obtained a construction loan to build new houses on twenty lots. What type of clause might be required in the security instruments for the construction loan? a. Subordination b. Partial release c. Exculpatory d. Safety

b. Partial release

The law that governs most closings is: a. Truth in Lending b. RESPA c. Sherman Act d. Equal Credit opportunity Act

b. RESPA

Regulation Z covers all of the following EXCEPT: a. Real estate loans for household purposes b. Real estate loans for small business c. Advertisements for mortgage financing that contain the amount of the down payment d. Advertisements for mortgage financing that contain terms of repayment

b. Real estate loans for small business

Vicki and Steven Barn's current home is listed with Jack Black of Best Deal Realty. They are selling because they will be retiring and are building a new home at the lake. Although the lake house is under construction, it will not be completed until December. In August, they receive an acceptable offer and the proposed closing date is September 15. The buyer offers to allow the Barns to lease the property after closing until their lake house is completed in December. If the buyer signs a required lender document at closing, confirming occupancy within 60 days, then: a. no mortgage fraud will have been committed if the contract indicated the leaseback and a copy is provided to the lender. b. all parties, buyer, seller, and agent are guilty of mortgage fraud. c. the seller is not guilty of mortgage fraud because he did not know about the lender required occupancy until the closing. d. only the buyer has committed mortgage fraud.

b. all parties, buyer, seller, and agent are guilty of mortgage fraud.

The role played by the FHA in mortgage lending is primarily that of: a. a banker b. an insurer c. an appraiser d. a rules-maker

b. an insurer

If a lender is charging 3.0 points on a $90,000 mortgage loan, how much is the charge? a. $2160 b. $2430 c. $2700 d. $3000

c. $2700

Which of the following loans might include a prepayment penalty clause? a. A VA Loan b. An FHA Loan c. A Convention Loan d. FNMA Loan

c. A Convention Loan

Which is true of notes and security deeds? a. A note secures debt while a security deed creates the debt. b. A note creates debt while a security deed conveys title to the buyer c. A note creates debt while a security deed secures the debt d. A security deed without a note is as valuable as a security deed with a note.

c. A note creates debt while a security deed secures the debt

The Real Estate Settlement Procedures Act limits the fees that may be charged prior to the delivery of the Good Faith Estimates. Those fees include: a. Credit report and appraisal fees only b. Loan origination fee only c. Credit report only d. Lock-in fee only

c. Credit report only

The consequences of mortgage fraud include all of the following Except: a. Increased loan processing fees and interest rates b. Increased crime and vandalism in the neighborhood c. Long term increase in property values. d. Increased foreclosure rates.

c. Long Term increase in property values

When the lender has reviewed both a completed loan application and a credit report for a specific buyer, the lender may issue a: a. Loan guarantee b. Pre-qualification letter c. Pre-approval letter d. Lenders title insurance policy

c. Pre-approval letter

Seller Bob wants to sell his house as soon as possible. He has an existing low interest loan on the property. The note contains an "alienation clause" which is triggered by a transfer of title. Under these circumstances which of the following is correct? a. The lender may call the loan only if the buyer is an alien. b. The buyer who assumes the loan will make the same payments the seller has been making c. The lender can refuse to allow an assumption d. The lender may not require that the buyer qualify to assume the loan.

c. The lender can refuse to allow an assumption

Which statement is true regarding FHA loans? a. There is a small prepayment penalty b. The FHA will insure both first and second mortgage loans c. To be insured, the loan must involve an FHA approved mortgage d. The loans are funded by the Housing and Urban Development department

c. To be insured, the loan must involve an FHA approved mortgagee

ONE WHO, IN GOOD FAITH AND WITHOUT KNOWLEDGE OF DEFECT, PAYS VALUABLE CONSIDERATION FOR A NOTE BEFORE IT IS DUE IS REFERRED TO AS: a. a receiver in trust b. an endorser in blank c. a holder in due course d. an assignor

c. a holder in due course

Fannie Mae and Freddie Mac are: a. National mortgage bankers b. second mortgage buyers c. secondary markets for mortgages d. government mortgage lenders

c. secondary markets for mortgages

In the field of mortgage lending, Georgia is: a. A lien theory state and a judicial foreclosure state. b. A lien theory state and a nonjudicial foreclosure state. c. A title theory state and a judicial foreclosure state. d. A title theory state and a nonjudicial foreclosure state.

d. A title theory state and a nonjudicial foreclosure state.

A borrower might have to pay a funding fee for which of the following types of loans? a. An interest only loan b. FHA loans only c. High-risk conventional loans d. VA loans only

d. VA loans only

Broker Baxter was asked by a purchaser to explain a budget mortgage. His best answer would have been: a. one you can afford b. a mortgage with graduated payments c. a mortgage with interest only payments d. a mortgage with payments including taxes and insurance

d. a mortgage with payments including taxes and insurance

Loan-to-value ratios are based on: a. appraised value b. contract price c. appraised value or contract price, whichever is higher d. appraised value or contract price, whichever is lower

d. appraised value or contract price, whichever is lower

When a borrower pays off a note that was secured by a deed of trust, then: a. the lender issues a release deed to the borrower b. the borrower receives a document called as satisfaction piece c. the deed of trust is cancelled d. the trustee issues a deed of reconveyance to the borrower

d. the trustee issues a deed of reconveyance to the borrower

What is the effect of a loan discount point? a. It increases the lender's yield b. It reduces the amount of closing costs that can be charged c. It increases the price paid for the loan by FNMA d. It reduces the cost of the loan to the borrower

a. It increases the lender's yield.

In a typical residential transaction, the decision concerning where the purchaser will apply for a mortgage loan is decided by: a. The buyer b. The seller c. The listing agent d. The selling agent

a. The buyer

In Georgia, most real estate closing are conducted by an attorney who represents: a. The lender b. The seller c. The listing broker d. The buyer

a. The lender

Who signs the note for the amount borrowed under a purchase money mortgage? a. The mortgagor b. the mortgagee c. The beneficiary d. The holder in due course

a. The mortgagor

Who signs the note for the amount borrowed under a purchase money mortgage? a. The mortgagor b. The mortgagee c. The beneficiary d. The holder in due course

a. The mortgagor

The primary benefit that is derived from choosing a VA mortgage loan lies in: a. a lower down payment b. A lower monthly payment c. A reduced interest rate d. Lower closing rate

a. a lower down payment

An acceleration clause gives the lender the right to: a. demand the entire balance owed due and payable upon default b. adjust the amount of payments if interest rates increase c. Increase the interest rate upon assumption d. charge a prepayment penalty if the loan is paid off before maturity

a. demand the entire balance owed due and payable upon default

A trust deed gives the lender a right to request the trustee perform certain tasks in order to fulfill the terms of the trust. The trustee may take action in those circumstances because the trustee holds: a. naked title b. equitable title c. reversionary title d. public title

a. naked title

Jeff, a veteran, offers to buy a house for $120,000, subject to obtaining a VA mortgage loan. The Veterans Administration certifies the market value of the home to be $118,000. What is the minimum down payment amount jeff might have to pay if he purchases this home? a. $500, a quarter of the $2000 b. $2000 c. $6000 d. 0

b. $2000

Which of the following loans would most likely require private mortgage insurance? a. A FHA graduated payment plan mortgage b. A 90% LTV conventional loan c. A 100% LTV VA mortgage loan d. A purchase money second mortgage loan

b. A 90% LTV conventional loan

A provision in a loan agreement that would prevent the lender from securing a deficiency judgement in the even the property sold in foreclosure for less than what is owed, is known as: a. A defeasance clause b. An exculpatory clause c. An alienation clause d. A receiver clause

b. An exculpatory clause

Regulation Z covers all of the following EXCEPT: a. Real estate loans for household purposes b. Real estate loans for small businesses c. Advertisements for mortgage financing that contain the amount of the down payment d. Advertisements for mortgage financing that contain terms of repayment.

b. Real estate loans for small businesses

Which of the following functions as an insurance provider? a. The federal Reserve Board b. The federal Housing Administration c. The Veterans Administration d. The Federal National Mortgage Association

b. The Federal Housing Administration

Just before the sheriff begins the auction sale of foreclosed property, the delinquent borrower offers to pay the outstanding debt and all costs incurred because of his default. In such a case: a. The sale must proceed, and the property sold to the highest bidder b. The borrower may pay the judgment and reclaim the property under equitable rights of redemption c. the borrower may pay the judgment and reclaim the property under statutory rights or redemption d. The lender may choose to either accept payment or proceed with the auction

b. The borrower may pay the judgment and reclaim the property under equitable rights of redemption

Which of the following best expresses the relationship between the availability of mortgage money and the level of interest rates? a. If the federal government debt were reduced, interest rates would rise b. by lowering reserve requirements for member banks, the Federal Reserve System can lower interest rates. c. When money is abundant, interest rates remain stable d. Borrowing by industry or by consumers has not effect on mortgage interest rates

b. by lowering reserve requirements for member banks, the Federal Reserve System can lower interest rates.

Concerning a fully amortized loan, it is correct to say that it is a loan characterized by: a. level of payments with equal portions applied to interest and principal b. level payments that cover all interest charged and reduce the principal to zero by maturity c. payments of varying amounts necessary to cover interest and reduce principal to zero by maturity. d. level payments that first pay all interest owed over the term of the loan then pay off principal

b. level payments that cover all interest charged and reduce the principal to zero by maturity

Scott is buying a home with a maximum FHA insured loan. The appraisal report values the home at $7000 less than the sale price. Which statement is true of this price difference? a. it can be financed by a junior mortgage loan obtained from the seller b. It can be financed in the form of a straight mortgage loan c. Scott must pay the difference if he chooses to buy the home d. It forces Scott to get a conventional loan instead of an FHA insured loan

c. Scott must pay the difference if he chooses to buy the home

An ad states the monthly mortgage payments on a loan are to be "only $634". Regulation Z requires further disclosures of all of the following EXCEPT: a. Terms of repayment b. Amount of down payment c. Simple interest rate d. Annual interest rate

c. Simple interest rate

Straight-term loans are generally: a. Longer in duration than amortized loans b. more popular now than amortized loans c. shorter in duration than amortized loans d. less costly to the borrower, all other conditions being equal

c. shorter in duration than amortized loans

The federal law created to primarily eliminate kickbacks and increased settlement costs is known as: a. the Federal Truth in Lending Law. b. the Equal Credit Opportunity Act. c. the Real Estate Settlement Procedures Act d. the Federal Fair Housing Act

c. the Real Estate Settlement Procedures Act

A licensee is NOT covered by terms of the Federal Truth in Lending Act when describing credit terms in: a. A display poster placed in the office window. b. Multiple listing cards placed in the broker's front window c. A flyer for a listing giving loan options d. A letter to a buyer client

d. A letter to a buyer client

The Real Estate Settlement Procedures Act was passed in response to complaints about excessive closing costs. It requires all of the following EXCEPT: a. Use of the HUD-1 Uniform Settlement Statement b. Delivery to the borrower of a settlement cost booklet c. Reasonable impounds d. Delivery of a Good Faith Estimate immediately upon application

d. Delivery of a Good Faith Estimate immediately upon application

The instrument, which pledges real property as security for a loan, is: a. a mortgage b. a trust deed c. a promissory note d. EITHER a mortgage OR a trust deed are correct

d. EITHER a mortgage OR a trust deed are correct

A buyer is unable to get a mortgage loan from a lender at this time because he has just entered into a new business. For that reason, he purchased a home under a land contract (installment contract). Which statement is true? a. A buyer gains, immediate legal title to the property at closing. b. The seller is, in effect, making an interest-free loan to the buyer. c. The seller cannot take back the property under any circumstances. d. In the event that the buyer defaults, the seller will not have to foreclose.

d. In the event the byer defaults, the seller will not have to foreclose.

Mary Jackson is applying for a 90% conventional loan with monthly payments including principal, interest, taxes and insurance of $1260. Her annual income is $50,400 and her current monthly obligations include a car loan of $325 per month and a student loan at $150 per month. Based on the information given which of the following statements is INCORRECT? a. Her front end ratio is 30% b. Her bac end ration is 41.3% c. The total debt used to calculate the back-end ration is $1735 d. Mary will qualify for the loan if the lender uses ratios of 33% and 38%

d. Mary will qualify for the loan if the lender uses ratios of 33% and 38%

The process in which the lender evaluates the buyer's affordability prior to finding a property to purchase by processing and verifying a completed application and credit report is called: a. Underwriting b. Alienation c. Disintermediation d. Pre-approval

d. Pre-approval

The Federal truth in Lending Act: a. Sets the maximum interest rate and any specific credit charges b. Applies to a purchase money mortgage c. Applies to loans made for farms d. Requires disclosure of the annual percentage rate and the total finance charge expressed as a dollar amount.

d. Requires disclosure of the annual percentage rate and the total finance charge expressed as a dollar amount.

The requirement fees for appraisal, survey, title search and document preparation must be listed on a closing statement is contained in: a. The Truth in lending law b. The Equal Credit Opportunity Law c. The Federal Usury law d. The Real Estate Settlement Procedures Act

d. The Real Estate Settlement Procedures Act