Chapter 1

When a buyer obtains a loan for the purchase of property, the lender will require: Select one: a. Mortgage and a promissory note. b. Deed of trust and a hypothecation note. c. Promissory note and a purchase agreement. d. Deed of trust note and a contract for sale.

a. Mortgage and a promissory note.

When a mortgage loan is repaid, how is the lien released? Select one: a. A reconveyance deed must be recorded b. A satisfaction of mortgage must be recorded c. A lien release is signed d. Any of the above

b. A satisfaction of mortgage must be recorded

A clause that means that the loan is not assumable is the: Select one: a. Subordination clause b. Alienation clause c. Partial release clause d. Escalator clause

b. Alienation clause An alienation clause is a due-on-sale clause which means that if the property is sold the loan must be paid in full and cannot be assumed.

A trustee on a deed of trust pays the real estate taxes and insurance on the property. Select one: a. True b. False

b. False

When a first mortgage is refinanced, a second mortgage will stay in second position even without a subordination clause. Select one: a. True b. False

b. False

All mortgages are? Select one: a. Due on sale. b. Liens. c. Recorded. d. None of these choices.

b. Liens.

In a home loan using a trust deed, who holds naked legal title to the property? Select one: a. The trustor b. The beneficiary c. The intermediary d. The trustee

d. The trustee

What is a blanket mortgage? Select one: a. A loan secured by more than one parcel of land b. A loan which refinances two existing loans c. A loan from a non-bank lender d. A loan secured by both real and personal property

a. A loan secured by more than one parcel of land

A borrower has the obligation to keep the mortgaged property in good repair for the benefit of the mortgagee. Select one: a. True b. False

a. True

Which of the following persons executes a trust deed? Select one: a. Trustee. b. Trustor. c. Mortgagee. d. Beneficiary.

b. Trustor. The trustor is the borrower in a deed of trust. He executes (signs) the trust deed (deed of trust) granting "naked title" to the trustee who holds this title to assure payment of a debt to the beneficiary (lender).

The clause in a security instrument that prevents the assumption of a loan is known as? Select one: a. acceleration. b. alienation. c. defeasance. d. release.

b. alienation.

Which of the following is not a financing instrument? Select one: a. A mortgage b. A deed of trust c. An option d. A note

c. An option

A lis pendens would be filed: Select one: a. In a judicial foreclosure b. In a trustee's sale c. Both of the above d. None of the above

a. In a judicial foreclosure

If a seller sells a home "subject to" a loan, who has the liability to repay the loan? Select one: a. The seller only b. The buyer only c. Both the seller and the buyer equally d. Primarily the seller but the buyer has secondary liability

a. The seller only

If anyone other than the delinquent borrower buys the property at a foreclosure sale, all junior liens are eliminated. Select one: a. True b. False

a. True

Which of the following is NOT essential to the validity of a mortgage? Select one: a. Debtor. b. Attorney. c. Creditor. d. Pledge of property.

b. Attorney.

When a new mortgage loan is made, which of the following documents must be recorded? Select one: a. The promissory note b. The mortgage c. Both of the above d. None of the above

b. The mortgage

A lender on a first mortgage has been offered a deed in lieu of foreclosure by the defaulting borrower. Would the lender want to know about any junior loans against the property? Select one: a. Yes, because it gives the lender a measure of how responsible the borrower has been in managing debt b. Yes, because the lender would have to make the payments on any junior loans c. No, because the lender on the first mortgage would have priority over any other loans d. No, because the borrower would be expected to continue making payments on any junior loan

b. Yes, because the lender would have to make the payments on any junior loans Lenders are not likely to accept a deed in lieu of foreclosure if the borrower has a junior loan against the property because the lender would be required to make the monthly payments on that junior loan.

What document would be recorded to eliminate the lien of a trust deed loan? Select one: a. A satisfaction of trust deed b. A satisfaction of mortgage c. A reconveyance deed d. A lien release

c. A reconveyance deed A reconveyance deed is recorded to give legal title back to the trustor (borrower) and release the lien.

A mortgage contains all of the following EXCEPT? Select one: a. Property description. b. Acknowledgement. c. Covenant not to compete. d. Signature of borrowers.

c. Covenant not to compete.

A lender has conducted a foreclosure sale after a loan default but the sale proceeds were insufficient to repay the debt. The lender gets a judgment from the court ordering the borrower to repay the remaining loan balance. This is an example of a(n): Select one: a. Insufficiency order b. Specific lien c. Deficiency judgment d. Repayment judgment

c. Deficiency judgment

When property is secured by a mortgage, the lender is known as the: Select one: a. Trustor b. Trustee c. Mortgagee d. Devisee

c. Mortgagee

Which clause in a mortgage loan would allow the lender to foreclose to recover the entire remaining loan balance if the borrower defaults on the loan? Select one: a. The defeasance clause b. The subordination clause c. The acceleration clause d. The alienation clause

c. The acceleration clause

Which of the following statements is true regarding an assumed loan? Select one: a. The seller continues making the monthly payments b. The buyer has no personal liability for the payments c. The buyer has primary liability for making the payments d. The seller has no liability to the lender

c. The buyer has primary liability for making the payments

Which of the following statements about a mortgage loan is correct? Select one: a. The mortgagee holds legal title b. The mortgagor has a lien on the property c. The mortgagor makes monthly loan payments to the mortgagee d. The mortgagee receives the loan proceeds

c. The mortgagor makes monthly loan payments to the mortgagee

The covenants in a mortgage require that the mortgagor do all of the following, EXCEPT: Select one: a. Pay real property taxes. b. Maintain the property in good condition. c. Make payments of principal and interest. d. Protect the lender with a life insurance policy.

d. Protect the lender with a life insurance policy.

If the mortgagor is in default on their mortgage payments, what is the legal process available to the mortgagee to collect? Select one: a. The mortgagee would obtain a power of attorney. b. The mortgagee would obtain an estoppel certificate. c. The mortgagee would obtain a satisfaction piece. d. The mortgagee would obtain a judgment causing foreclosure.

d. The mortgagee would obtain a judgment causing foreclosure.

In a trust deed loan, which of the following statements is correct? Select one: a. The trustor makes the monthly payment to the trustee b. The beneficiary makes the monthly payment to the trustor c. The beneficiary makes the monthly payment to the trustee d. The trustor makes the monthly payment to the beneficiary

d. The trustor makes the monthly payment to the beneficiary In a trust deed loan the borrower is the trustor and makes the monthly payment to the beneficiary who is the lender.

Which of the following statements is true regarding defaulting borrower's right to redeem the property after the foreclosure sale for a period of time by repaying the lender the full amount due on the loan? Select one: a. This is known as the equity of redemption and applies to judicial foreclosures only b. This is known as a statutory redemption right and applies to nonjudicial foreclosures only c. This is known as the equity of redemption and applies to nonjudicial foreclosures only d. This is known as a statutory redemption right and applies to judicial foreclosures only

d. This is known as a statutory redemption right and applies to judicial foreclosures only

A mortgage note or promissory note must accompany a mortgage or deed of trust. Select one: a. True b. False

a. True

Several people buy a piece of property jointly. If one of the owners does not pay his portion of the note, who is responsible to the lender for the payment? Select one: a. All of the other owners, jointly and severally. b. It is the banks problem as long as the others pay their portion of the note. c. The owner that has the greatest interest in the property. d. The other owners, in equal amounts.

a. All of the other owners, jointly and severally.