Unit 14 and 15 Real Estate Financing Principles and Practices

What is a deficiency judgement?

A judgement obtained by the bank against a debtor when a property is foreclosed on for less than the amount owed. It is a judgement against all of the debtors property, therefore it is a general lien.

Which of the following statements regarding adjustable rate mortgages is NOT true?

Adjustable rate mortgages may contain interest rate caps and payment caps. The payment caps can cause negative amortization.

A borrower needs to reduce the principal and interest payment on his/her loan in order to qualify. The lender may charge ______?

Discount Points - prepaid interest that lowers the stated interest rate on the note which results in lower principal and interest payments. The borrower pays 1% of the loan amount as the fee for each discount point which results in a 1/8 or .125 change in the stated interest rate.

The Dodd-Frank Act is a law which created the Consumer Finance Protection Bureau. This Act is mostly responsible for overseeing the actions taken by

Dodd-Frank act helps prevent lenders from taking advantage of borrowers. ThatÂ's all you need to know about it.

Calculate the interim interest owed on a February 20 closing where the borrower is obtaining a 90% LTV loan at 4.25% annual interest to purchase the $237,000 property.

$237,000 X 90%LTV = $213,300 loan $213,300 loan X 4.25% annual interest rate = $9,065.25 annual interest $9,065.25/360=$25.18 daily interest $25.18 daily X 11 days remaining in Feb = $276.99interim interest

Keith is purchasing a $350,000 home and plans to buy his mortgage rate down from 5.25% to 5% utilizing 2 discount points to accomplish this. He is obtaining a 30 year fixed rate note with a loan to value ratio of 80%. Based on this information, how much will he be charged on the closing statement for the discount points?

$350,000 X 80%LTV = $280,000 loan amount $280,000 x 2% = $5,600

How is minimum monthly income needed to qualify for a loan calculated for a conventional loan?

1) Calculate the total monthly housing payment: Principal + Interest + Taxes +InsuranceCalculate the minimum monthly income for housing: PITI / 28% 2) Calculate the total debt: PITI + Long Term DebtCalculate the minimum monthly income for total debt: Total Monthly Debt / 36% 3) The minimum monthly income is the higher of the two numbers.

How do you calculate the total interest paid over the life of a 30 year mortgage?

1) If not provided calculate the mortgage principal and interest payment: Loan / 1,000 X Factor 2) Calculate the total amout paid in principal and interest: Monthly PI X 360 3) Total P&I - Loan = Interest Paid over the Life of the Loan

Bob is building a home and closes on a construction loan with Speedy Close Bank. The lender will be providing temporary financing, thus requiring B to refinance into a more permanent loan. Which of the following best describes the new loan?

A take out commitment relates to new construction property and is permanent financing once the home has been completed. Construction loans are typically interest only and temporary financing used while the property is built. When a loan does not fully amortize the final payment is known as a balloon payment. A wraparound mortgage does not disturb initial financing. A second loan is obtained and the borrower will make one payment which pays both loans.

Which of the following best describes the purpose of paying discount points to a lender?

Discount points are paid to reduce the stated interest rate on the note and lower the monthly payment to the borrower. It is prepaid interest and a sunk cost which may be charged on conventional, FHA and VA loans. Discount points increase the yield on the loan.

Which of the following best describes mortgage discount points?

Discount points offer a borrower the flexibility to essentially choose their own interest rate by paying higher fees at the front of the loan. These higher closing costs are paid directly to the lender and in exchange the lender agrees to lower the interest rate for the full life of the loan (15, 20, 30 years, etc). This could mean big savings for the borrower if they keep the loan for a very long time. Because the fee is paid up front, it actually makes the cost to obtain the loan much more expensive in the beginning for the borrower. We say that these increase the lender's yield because they get this money early and up front.

Jane's property, which she has owned for over 10 years, was recently foreclosed on. Which of the following statements is FALSE?

FHA loans are insured. VA loans are guaranteed. In the event of a default and foreclosure, the lender will be compensated according to a sliding scale. When foreclosure has taken place, proceeds may not be enough to pay all lien holders. Costs of sale are paid first, the liens according to recordation date and time. Typically there will not be enough proceeds to pay all lienholders. The lien is removed from the property and the lender may then seek a deficiency judgement.

All of the following are characteristics of an FHA 203b loan, EXCEPT?

FHA loans cannot contain a prepayment penalty. FHA loans are also assumable by qualified borrowers.

How is loan to value ratio determined on a residential loan?

Loan to Value Ratio is the relationship between the appraised market value of the home and the amount borrowed. When answering math questions that essentially want you to restate a math formula, look for answers that only include things in the formula rather than trying to "figure out" what each means. If loan to value ratio is related to the value of the property and the amount the bank will allow a person to borrow, there is only one answer choice here which mentions those two things.

Loan to value ratio is determined by:

Loan to value is calculated by taking the mortgage and dividing by the purchase price. LTV decreases as the amount of down payment increases. The VA loan has the highest loan to value as the borrower can obtain 100% financing, thus having 100% loan to value. When a borrower obtains a conventional mortgage with 20% down payment, they will have an 80% LTV.

What is Regulation Z?

Part of Truth-in-Lending - it sets rules about advertising regarding consumer finance (home purchase, car purchase, etc.). It DOES NOT eliminate the use of certain terms in advertising. It DOES require disclosure of financial terms with trigger terms are used - payment, down payment, interest rate being the most common. APR must be disclosed if Reg Z is triggered, but APR by itself is not a trigger.

What is hypothecation?

Pledging an asset as security for a debt while still being able to use the asset. Cars and homes are financed through hypothecation.

Who is the mortgagor and mortgagee when a buyer takes out a mortgage on a home?

The mortgagor is the buyer/borrower and the mortgagee is the bank/lender. One way to remember this is that the borrower has the "ORs" and the lender has the "EEs".

What does an acceleration clause accomplish when it is included in a mortgage note?

When a borrower defaults, they are technically just late on payments. If there were no accelleration clause in the loan note, the borrower would always be able to "catch up" on payments to avoid foreclosure. The accelleration clause gives the lender the opportunity to just declare "nope, we are tired of waiting for you to pay. You're in default. Pay us the entire balance right now or we will foreclose".

A borrower obtains a 30-year fixed mortgage with a monthly payment of $1,200. All of the following statements are true regarding financing, EXCEPT:

When a borrower makes additional payments on the loan it will reduce the principal balance and will reduce the number of remaining payments on the loan (decreasing the loan term). It does not impact the dollar amount of future payments.

A property is scheduled for closing on August 20. Which of the following is the best estimate of a seller's mortgage loan payoff as of the day of closing if they are selling their home for $250,800 and paying off their 5% annual interest loan which has a principle balance of $215,675?

$215,675 loan amount X 5%annual interest = $10783.75 annual interest $10,783.75/360=$29.95 daily interest $29.95 daily interest X 20 days = $599.09 accrued interest $215,675loan balance + $ $599.09 accrued interest = $216,274.09

What is the LTV for a VA loan? Who can qualify for a VA loan? Who can assume a VA loan?

1) The typical loan to value is 100% or no money down. 2) A qualifying veteran or unremarried widow/widower 3) A qualifying buyer - does not have to be a veteran

Which of the following best describes a borrower obtaining a loan where the payment includes principal, interest, taxes and insurance?

A lender prefers a budget mortgage as real property taxes have a higher priority over other liens and the collateral for the loan is protected when it is insured. A fully amortizing loan means that the loan will have a zero balance at the end of the loan repayment term. A package loan includes both real and personal property. A growing equity loan provides for increases in the mortgage payment so that the borrower is paying down the principal borrowed.

Willie owns a construction and development firm which has received approval for a 50-unit condo property. The units will be fully furnished when sold. What type of loan will be used?

A package loan is used to finance both real and personal property. A construction loan is typically interest only and temporary financing. The take out commitment is for permanent financing once a new construction home has been completed. A blanket mortgage is used to finance multiple properties or lots, typically for new subdivisions.

Which of the following are NOT a characteristic of an FHA 203b loan?

An FHA 203b loan is the standard loan offered, which is assumable and therefore cannot contain a due on sale or alienation clause. The due on sale or alienation clause would make not permit assumption by a new borrower. FHA loans are assumable and cannot contain a prepayment penalty. There are FHA loan limits that are established by region so it is best to have the borrower meet with a lender for prequalification. In order to qualify for an FHA loan, the borrower must owner occupy, however can purchase a multi-unit property (up to 4 units).

What does a veteran need to have to demonstrate that he/she is entitled to a VA loan?

Certificate of Eligibility

What is equity? How does it increase?

Equity = Fair Market Value of Property - less Balance Owed Equity is increased when a borrower makes additional principal payments, the value of the property increases or the owner makes improvements to the property that increase the value.

Which of the following statements in NOT correct regarding equity?

Equity is the difference between the fair market value of the property and the amount owned. Equity increases when additional payments are made towards principal or when the fair market value of the property increases. When additional debt is taken against a property it decreases the equity.

When a borrower takes out an adjustable rate mortgage, the interest rate is permitted to change up or down depending on changes in a benchmark rate. The rate can change because the loan contains an _______ clause?

Escalation Clause - think of riding an escalator up or down to help remember this. Interest rates are tied to a benchmark rate, like the LIBOR, and the bank adds its profit to this rate, known as the margin.

A borrower makes additional principal payments to his/her loan. What impact would this have on a fixed mortgage?

Extra payments to principal reduce the debt more quickly and will lessen the number of years the loan will be outstanding. It does not impact the fixed payment.

When a deed of trust is used to provide collateral on a mortgage loan, all of the following are required in a foreclosure action EXCEPT:

In states that use Deeds of Trust (Title Theory States), the entire point of the trustee is to have someone appointed in advance in case the loan goes into default so that LAWSUIT CAN BE AVOIDED. This is the absolute key difference between a lien theory state and a title theory state. There are no lawsuits involved with title theory foreclosures.

How is loan-to-value calculated?

It's in the name. Loan to value -------> Loan divided by value

The buyer of a new home is acquiring a loan for 90% of the $135,000 purchase price. One lender is offering the buyer a 15-year conventional mortgage with monthly principal and interest payments of $1,258. Another lender is offering the buyer a 30-year conventional mortgage with principal and interest payments of $896. Both mortgages are offered at 6.75% annual interest with a 1% origination fee. What is the difference in the total amount of interest that would be charged over the life of the two loans?

Loan Amount = $135,000*90%=$121,500 15 year monthly payment $1258X12 monthsX15 years=$226,440 total repayment - $121,500 loan amount = $104,940 interest 30 year loan payment $896 X 12 Months X 30 years=$322,560 total repayment -$121500 loan amount = $201,060 interest $201,060-$104,940=$96,120 difference in interest

Is the Standard NCAR/NCBA Offer to Purchase and Contract contingent upon financing or appraisal?

No. A buyer should determine this prior to the expiration of the Due Diligence Period. In the event the buyer is not satisfied they can terminate and receive a refund of the EMD but not the DDF so long as the due diligence period has not expired.

Which of the following transactions would be required to comply with the Real Estate Settlement Procedures Act?

RESPA applies to consumer transactions. The purchase of a farm over 25 acres, a building with more than 4 units and an office building would all be considered commercial transactions. Seller financing is exempt in most situations, however the answer states only partial seller financing is being obtained.

Which of the following statements is FALSE regarding the Real Estate Settlement Procedures Act?

RESPA does not apply to agent commission or the payment of referral fees. It does not permit kickbacks among settlement service providers. The way to recall what RESPA applies to is KEUBDL - "Kids Eat Up Boogers Dirt and Lead). K - no kickbacks, E - escrow limits, U - uniform settlement statement, B - booklet amount financing, D - disclosure of loan servicing and L - loan estimate within 3 days of mortgage application.

Regulation Z would NOT apply to which of the following purchases assuming that the buyer sought financing?

Regulation Z applies to consumer financing. A 5 unit property would be considered commercial property and therefore would be exempt from advertising disclosures.

Regulation Z of the Truth in Lending Act is enforced to guarantee which of the following?

Regulation Z of the Truth in Lending Act requires any lender who is advertising a loan product to give out all of the loan terms as part of the advertisement. The four items which Regulation Z says must be disclosed if a loan is being advertised are the APR (Interest rate of the loan), the monthly payment amount (and how many payments), any intial financing charges such as discount points or origination fees, and how much money the borrower would be borrowing to make all these numbers true. Those are the disclosure items. Regulation Z says that any advertisement which includes numbers related to the loan counts as a loan advertisement and triggers the disclosures.

A mortgagor refinances their first mortgage, however since the second mortgage is near maturity, elects to continue to pay the second note as agreed. The new lender wants to be the superior lien over the second mortgage. What will the second lender do to accomplish this through:

Subordination is trading places which allows a lender with a higher priority to change to a lower position. Subrogation occurs when a party signs over the right to sue, which occurs when an insurance company pays a claim and then will seek recovery from the party at faulty. Hypothecation is pledging an asset as security, allowing the borrower to use the property while payments are made. Novation allows a new party to take over a debt through assumption releasing the original debtor.

All of the following are characteristics of VA loans, EXCEPT?

The VA does guarantee the lender against loss but it is according to a sliding scale.

A buyer asks her agent to explain the basic elements of the various types of loans that are available. Which of the following statements would NOT be true?

The government does not insure or guarantee conventional mortgages. When a borrower does not have 20% to put down on the purchase of the home, the lender will require the borrower to pay for private mortgage insurance (PMI). The name says it all, it is private. VA loans are guaranteed, according to a sliding scale. Only a veteran with an entitlement or qualifying unremarried widow or widower is permitted to originate a VA loan. The interest rate and fees for both FHA and VA are determined by the bank, although banks can only charge up to 1% origination. FHA and VA loans cannot charge a prepayment penalty. Private loans of $150,000 or less are not allowed to charge a prepayment penalty.

A borrower purchased a property 25 years ago and has just made the final payment on the loan under a title theory state. Which of the following clauses has been triggered?

The lender must return the rights conveyed by the deed of trust once the borrower/mortgagor has made final payment. The borrower has "defeated" the mortgage triggering the defeasance clause. The due on sale / alienation clause requires the loan to be paid in full when ownership is transferred. The acceleration clause is triggered when the borrower defaults on the mortgage and the lender calls the full balance due and payable. Subrogation is the signing away the right to sue..

What is the monthly Principle and Interest Payment on a mortgage note that is issued for 30 years at 4.75% annual interest if the borrower is obtaining a $225,000 loan?

The loan factor on a 30 year note at 4.75% annual interest is $5.22. This means that for every thousand dollars borrowed, the borrower will repay $5.22 monthly. In this case, the borrower is obtaining a $225,000 loan and is therefore borrowing 225 thousand dollars. That is 225 X $5.22 = $1,174.50

What is a Certificate of Reasonable Value?

The method that the VA uses to determine the maximum loan amount on a particular property. It often takes the place of a separate appraisal. The qualifying veteran or unremarried widow/widower can purchase the home at a greater amount however will need to pay the difference.

The foreclosure process most often used in a title theory state is considered:

The process of foreclosure in a title theory state is known as a foreclosure by advertisement, where notice is publicly posted, the property is sold at auction, and the property is transferred to the winning bidder by trustee deed. There is a 10-day upset bid period, where the sale amount can increase, which resets the 10-day period. Judicial foreclosure occurs in lien theory states where the mortgagee/lender has to sue for a judgement before foreclosure can occur. In a strict foreclosure state the court established the amount due under the mortgage and order the borrower to pay the amount in a set time period. If the borrower fails to pay they will lose the equitable right of redemption.

What is the primary purpose of the secondary mortgage market?

The secondary mortgage market is where banks go to sell the loans that they have already made. The banks sell these loans to various companies and investors in exchange for immediate cash (versus having to wait for the loan payback). This immediate cash gives the banks money to go out and lend again. They make more loans so they can sell more loans and then again have more money to lend. They do this because they make fees on every loan they issue so the more loans made, the more profitable the bank is.

What is the amortization loan factor for a 15 year note at 5.5% annual interest?

Use the amortization loan factor chart found here in the LTP chapter. Find the correct number of years and interest rate on the chart.

What is an alienation clause?

When an alienation / due on sale clause is included in a mortgage, the loan must be paid in full if the borrower transfers ownership to another. This means that a loan is not assumable. FHA and VA loans cannot contain a due on sale / alienation clause.

Kristi and Isaac are purchasing a property located at 2517 Red Mountain Rd by obtaining a VA loan. The contract price is $215,000, however the certificate of reasonable value was issued at $210,000. The veteran may:

A VA loan cannot exceed the CRV - certificate of reasonable value. The borrower can terminate the contract under the FHA/VA financing addendum.

A balloon payment would be due at the end of each of these mortgage loans EXCEPT

A balloon payment is made when the payments made over the course of the loan are too small to pay the balance down in full by the time the loan ends (term ends). This leaves an outstanding balance. Only fully amortized loans are paid down with large enough monthly payments to leave a loan balance of zero after the last regular monthly payment.

A developer has obtained financing for a new subdivision with 100 salable lots. When a buyer purchase a property a portion of the proceeds will be paid to the lender so that they will remove any lien they have in that lot. What type of loan does the developer have?

A blanket loan allows the borrower/mortgagor to finance multiple lots under one loan. The agreement outlines how much must be paid to remove the lien against each individual property is sold. A construction loan is the riskiest form of financing, which is often temporary. Permanent financing obtained for when construction is completed is known as a take out commitment. A package loan is used to finance both real and personal property.

All of the following statements about adjustable rate mortgages are correct EXCEPT:

Adjustable rate mortgages have a lot going on with them. However, one very basic thing needs to be understoodÂ....the fact that the interest rate can change (mostly upward) means the payment can change (mostly upward) and this means that any borrower who has an adjustable rate loan is much more in danger of getting into trouble on payments and thus being foreclosed on. Therefore the risk in these loans is MUCH higher than with fixed rate loans.

A loan where the balance may not be reduced when monthly payments are made by the borrower and may result in negative amortization is best defined as a/an:

An adjustable rate mortgage may contain rate caps and payment caps. The payment cap may result in negative amortization, where the payment does not cover the amount of interest due. A growing equity mortgage results in the payment to principal causing the balance to more rapidly reduce. A term only mortgage is interest only with no resulting payments to principal. A budget mortgage includes principal, interest, taxes and insurance.

Tom is purchasing a home and may obtain an uninsured conventional mortgage loan if the:

Loans are all about security for the lender. Ultimately, the one thing that provides the security is the property itself. As long as the lender feels comfortable that they can foreclose on the propety and get back all of their money, they are comfortable making the loan. When lenders get nervous that the property may not sell for a high enough price at foreclosure to pay them back, they force the borrower to purchase mortgage (default) insurance. If, however, the bank is VERY comfortable that the property is worth far more than the loan amount, they may allow the loan to remain uninsured (no mortgage insurance). This is only true when the bank is VERY comfortable with the amount of equity in the property.

Jaime is purchasing a home where the seller is not paid off the mortgage as it transfers with the property. The seller will be relieved of liability in the event that Jamie defaults on the loan. The release of further liability is obtained through:

Novation is used to release liability when a mortgage is assumed. A purchase money mortgage is seller financing. A take out commitment is permanent financing once a new home has been built. A non-recourse loan means that the borrower cannot be sued for a deficiency judgement.

Kyle and Trina, a recently married couple, are purchasing a property located in a title theory state. The contract specifies that Kyle and Trina will take the title as tenancy by the entirety, however only Trina will be signing the mortgage note. Which of the following statements is FALSE?

One spouse can purchase the property, qualifying for the mortgage and only that spouse would be required to sign the promissory note. In a title theory state, the married couple would need to sign the deed of trust in order for it to be enforceable. When property is taken tenancy by the entirety both spouses own 100% of the property. The ownership cannot be defeated by a debt where only one spouses has signed for. In a title theory state the borrower/mortgagor retains equitable title while the lender/mortgagee retains legal or actual title through the trustee. This makes foreclosure action faster in a title theory state.

Which of the following advertisements would violate Regulation Z? I. Great home with low down payment, easy monthly payments and an APR of 4.75%. Own this home for just $245,000. HOA dues are $100 monthly. Call Tony at Help You Sell today. 5551212 II. Sell your lawnmower you won't need it. The HOA has got it covered for just $200 per month. 100% financing is available with the seller provided second mortgage. Call Mary, Broker at Buy Right. 555-4242

Regulation Z limits what can be advertised without full disclosure. When a broker advertises payments, down payment or interest rate, then they must disclose all terms including APR, number of payments, and total amount financed. A broker can advertise general statements like low down payment, low payments, or great rates available. When a broker gives specifics it generally triggers Regulation Z. It is important to note that property taxes and HOA fees do not trigger Regulation Z disclosures.

Which of the following would NOT cause the full disclosure of the four primary credit terms according to Regulation Z of the Truth in Lending Act?

Regulation Z of the Truth in Lending Act requires any lender who is advertising a loan product to give out all of the loan terms as part of the advertisement. The four items which Regulation Z says must be disclosed if a loan is being advertised are the APR (Interest rate of the loan), the monthly payment amount (and how many payments), any intial financing charges such as discount points or origination fees, and how much money the borrower would be borrowing to make all these numbers true. Those are the disclosure items. This question deals with "well do I have to disclose all that stuff?". The answer to that question is that it depends on if you are actually advertising a loan. Regulation Z says that any advertisement which includes numbers related to the loan counts as a loan advertisement and triggers the disclosures. In this question, only B has no numbers and thus is not a loan advertisement.

What would an investment in real property which generates spendable income be called?

Spendable Income from an investment property is cash flow. Equity buildup isn't spendable because equity is tied up in the property until the property is sold.

How does the alienation clause differ from the acceleration clause?

The ALIENATION CLAUSE is triggered when the property is sold or transferred and requires the loan to be paid in full. The ACCELERATION CLAUSE is triggered when a borrower defaults (not making payments) and the lender calls the full debt due and payable.

Which of the following is a function that is performed by the Federal Reserve?

The Federal Reserve can set lender reserves which means that those funds cannot be loaned. They can change the discount rate, which is the rate of interest charged to member banks when they borrow money. This has an indirect impact on consumer lending rates. The primary lending market is typically the local bank or credit union. They then package and sell the loans to the secondary market which refills the primary lenders available funds.

Which of the following statements is true of loans issued under the VA program?

The VA (Veterans Administration) loan program is a program that allows qualified former military members to purchase property without having to make a down payment. It is a 100% loan to value loan meaning the lender is going to lend out the FULL appraised market value of the property. This type of loan is extremely risky for banks because the borrower has no equity in the property. To make this loan, banks require the borrower to have mortgage (default) insurance. This insurance comes from the VA. The VA does not make loans and does not set interest rates. VA simply provides the insurance that helps to protect the bank in the event of a default. However, even this level of protection is not perfect. There is no mortgage insurance policy that can absolutely guarantee that the bank won't lose any money. The guarantee is that the mortgage insurance will HELP cover any losses on the loan. So, guaranteed does not mean FULLY GUARANTEED.

Which loan has the highest loan to value - Conventional, FHA or VA?

The VA loan has the highest LTV - as the borrower can finance 100% or no down payment. An FHA loan typically has a 96.5% LTV as the borrower can put as little as 3.5% down. A conventional loan typically has the lowest LTV as it requires a larger down payment - at least 20% to avoid private mortgage insurance.

Which of the following clauses result in a loan that is not assumable?

The alienation / due on sale clause means that the loan must be paid in full if the property is sold. The defeasance clause requires the bank to return legal/actual title once the mortgagor/borrower has made final payment. The acceleration clause is trigged when the borrower defaults and the lender calls the full balance due. A take out commitment is the requirement to have permanent financing to pay off the construction loan.

Jeffrey obtains an FHA 203b loan for $180,000 from Shady Tree Bank for 30 years with the payment of 1% origination and 2 discount points. The payments for this loan will be made in arrears with the final payment resulting in reconveyance of the title held by the trustee. Jeffery would be considered which party in this transaction?

The obligor/promisor/mortgagor/borrower grants the bank an interest in the property until final payment is made while the obligee/promisee/mortgagee/lender receives the rights that have been granted. The way to remember this is that borrower has "or's" and the lender has "ee's". An administrator is appointed by the court to administer the state of a deceased person that died intestate (without a will). A beneficiary is an individual that receives property or assets from a deceased person. A will would define what the beneficiary would be entitled to receive.

What is a Short Sale?

The only thing short in a short sale is the money to the bank. The seller of the property must as the bank/lienholder to accept a lower amount than what is owed to the bank. The sales proceeds are not sufficient to cover the secured liens. Short sales are a material fact as the seller lacks the ability to satisfy the debts against the property and can only transfer free of financial liens with lender approval. The lienholder can sue for a DEFICIENCY JUDGMENT to cover the shortfall and is not required to release or forgive the seller for the difference.

Typically the lender will place the winning bid at a foreclosure auction in a title theory state, especially when the property is under water (more money is owed than the property is worth). What type of deed will the lender receive upon winning the auction and expiration of the statutory right of redemption?

The winner at the foreclosure auction will receive a TRUSTEE's DEED. The statutory right of redemption allows the defaulted borrower a chance to pay off the debts owed prior to the 10-day right of redemption period. The lender is entitled to file for a DEFICIENCY JUDGMENT when the proceeds are not sufficient to cover the amount owed to the bank plus the foreclosure fees.

Identify the document which pledges the property as security in a lien theory state

There are two documents which pledge real estate as collateral for the payment of loans. In title theory states, this document is called a deed of trust. In lien theory states, this document is called a mortgage.

The Truth in Lending Act / Regulation Z permits a three business day right of rescission for all of the following loans, EXCEPT:

There is no right of rescission for a first mortgage, however a borrower has the right to rescind refinances, home equity loans and reverse mortgages.

A state practices foreclosure using a suit for foreclosure process. Which of these is true in this type of foreclosure action?

This is a lien theory state. Answers A, B, and C all refer to title theory states.

All of the following statements regarding VA loans are true, EXCEPT:

VA loans are assumable by veterans and non-veterans regardless of entitlement. When a veteran with an entitlement assumes a VA mortgage from another veteran, the mortgagor veteran that originally borrowed the money will have his/her entitlement restored. When a non-veteran assumes the mortgage it must be paid in full before the veteran's entitlement is restored. A qualifying unremarried widow or widower may obtain a VA loan. A veteran can only have one VA loan at a time.

Which of the following statements is true of VA loans?

VA loans will typically lend up to 100% of the appraised market value of the property PLUS the borrower's closing costs. This meanst the borrower may end up with a loan balance that is more than the appraised value of the property but cannot actually borrow more than the purchase price for the sale. VA borrowers are protected in that they must be given the right to get out of any transaction without penalty if the property does not appraise at contract value and the owner is unwilling to lower the sales price.

Brandon purchased a home by obtaining a VA loan 5 years ago. Due to an economic setback, Brandon is significantly behind on the mortgage. The lender has tried multiple workouts, however Brandon continues to breach the agreement. The lender has now sued Brandon to obtain a judgment. Based on the above, Brandon has:

When a lender must sue before foreclosing on a property the property was purchased in a lien theory state. In a title theory state the mortgagor/borrower grants the mortgagee/lender a deed of trust securing the debt to the home. It is faster to foreclose in a title theory state. Alienation/due on sale clause requires the mortgagor/borrower to pay of the loan when ownership has been transferred to another party, which means that the loan is not assumable. The deed of trust requires the borrower to repay the debt in order to keep the property and may be referred to as the "pay to stay" however there is not a pay to stay clause.

A seller provides a purchase money mortgage to a buyer as the sole method of financing. The buyer lives in the property for 5 years before defaulting on the mortgage. Which of the following statements would NOT be true?

When a seller provides financing they are not permitted to sue for a deficiency judgment. In a title theory state, the trustee hold legal title which allows foreclosure to occur faster. Foreclosure is by advertisement and the property is sold at auction to the highest bidder. The borrower has an equitable and statutory right of redemption. E comes before S; the equitable right of redemption is before the auction and the statutory right of redemption is after the foreclosure auction has occurred. The mortgagor is the borrower and they are entitled to the excess after all debts and fees have been satisfied.