Chapter 11

reserves

Cash on deposit or other highly liquid assets a borrower must have in order to cover two months of PITI mortgage payments after they make the cash down payment and pay all closing costs.

28%

Conventional lenders consider a borrower's income adequate for a loan if the proposed total mortgage payment of PITI does not exceed _____ of stable monthly gross income.

power of sale clause

This non-judicial action is authorized by a power of sale clause in the trust deed or note.

consumer finan. protection bureau

Title X of the Dodd-Frank Act created the ________ as an independent entity within the Federal Reserve.

$100,000

What is the required down payment if the purchase price is $500,000 and the lender will approve a loan-to-value ratio of 80%?

Insurance companies tend to finance commercial real estate projects. Lenders may sell mortgages to investors to receive funds to make additional mortgage loans.

Which statements about mortgage lending are TRUE? Select all correct responses.

purchase money mortgage. Purchase money mortgage is a general term used to describe seller financing. More specifically, however, it refers to the actual promissory note and mortgage that the buyer gives the seller in a seller-financed transaction.

Which term BEST describes the type of loan where a seller finances all or part of the sale of property for the buyer?

conventional mortgage

Which type of mortgage is NOT insured or guaranteed by the government?

mortgage lender

Who has ultimate responsibility for the correct and timely delivery of disclosures to the borrower?

title

Actual lawful ownership of real property.

499.86 To determine the interest for the second month, multiply the balance by the interest rate and then divide by 12: $49,985.69 x 0.12 / 12 = $499.86. So, $499.86 of the borrower's $514.31 payment in the second month will go toward interest.

1st month: $50,000 x .12 = 6,000 annual interest$6,000 ÷ 12 = $500 interest$514.31 - $500 = $14.31 principal$50,000 - $14.31 = $49,985.69 Balance after first month: $49,985.69 Here's what you know about this loan thus far. Remember: The interest rate on this 30-year loan is 12% and monthly payments are $514.31. You know that the principal balance after the first month is $49,985.69. The interest rate on this 30-year loan is 12% and monthly payments are $514.31. What is the interest portion of the second monthly payment?

deed in lieu of foreclosure

A bank notifies a homeowner that she is delinquent on her mortgage and threatens foreclosure. The homeowner offers to give the property to the bank if the bank will NOT file the foreclosure suit against her. This is known as

782 Under the first ratio, the borrower would qualify for $896 ($3,200 x .28). Under the second ratio, the borrower would qualify for $782 ($3,200 x .36 = $1,152; $1,152 -$370 = $782). The borrower must accept whichever is lower.

A borrower has a stable monthly gross income of $3,200 and recurring monthly debts of $370. What is the maximum amount of money available to him for monthly housing expenses to qualify for an 80% conventional loan?

75% / 90% The LTV is 75% ($90,000 ÷ $120,000 = 75%), where $90,000 is the first mortgage from the primary lender. The CLTV is 90% ($90,000 + $18,000 = $108,000; $180,000 ÷ $120,000 = 90%) where $18,000 is the second mortgage from the seller.

A borrower offers to purchase a home for $120,000. His first mortgage amount is $90,000 and the seller is providing a second mortgage of 15% of the sale price. The borrower provides the balance as a cash down payment. What are the LTV and CLTV?

false. This is actually the right of reinstatement, not the right of redemption. The statutory right of reinstatement is a way for borrowers to cure the default by bringing the mortgage current within a specified time period after they receive a notice of foreclosure or after the notice was recorded. This right to redeem the property prior to the sale is called the equitable right of redemption.

A borrower's right to bring the balance of the loan current before a foreclosure action is filed is known as equitable right of redemption.

81% The LTV is calculated as $130,000 (mortgage loan amount) divided by $160,000 (appraised value) =.81 or 81%. Remember that LTV is calculated on the lower of the sale price or the appraised value. The lender would not make this loan.

A buyer can make a maximum cash down payment of $35,000. The sale price of the property is $170,000, so the buyer wants to borrow $130,000. The property was appraised at $160,000, and the lender requires an 80% loan-to-value ratio. What is the loan-to-value ratio (LTV) for this transaction?

85% The first mortgage amount is $160,000. The second mortgage amount is the sale price minus the first mortgage and the down payment amounts: $200,000 - $190,000 ($160,000 first mortgage + $30,000 down payment) = $10,000. The sum of all liens on the property is $170,000 ($160,000 + $10,000 = $170,000). Divide the total amount borrowed by the sales price to find the combined loan-to-value: $170,000 / $200,000 = 85% CLTV.

A buyer is paying $200,000 for a house. He makes a $30,000 down payment, gets a first mortgage for $160,000, and a second mortgage to cover the balance. What is his CLTV?

Certificate of Reasonable Value

A certificate establishing the current market value of a property based on an approved VA appraisal. Issued by the VA, this certificate places a limit on the amount of a VA guaranteed loan.

Certificate of Eligibility (COE)

A certificate issued by the Department of Veteran's Affairs to establish status and amount of a veteran's eligibility to qualify for loan guarantee.

defeasance clause

A clause used to defeat or cancel a certain right upon the occurrence of a specific event.

accleration clause

A contract clause that gives the lender the right to declare all outstanding payments immediately due upon a default by the borrower.

trustee

A distinguishing characteristic of trust deeds is that the _____ has the authority under the terms of the trust to commence non-judicial foreclosure action when the loan has gone into default.

origination fee

A fee charged by a lender to cover the administrative costs of making a loan, usually based on a percentage of the loan amount, where 1% equals one point. Also called Loan Origination Fee.

Balloon Payment

A final lump-sum payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the loan term.

Mortgage Banker

A financial institution that usually originates and funds its own loans, which may then be sold on the secondary market. Also called Mortgage Banking Company.

promissory note

A financing instrument that evidences a promise to pay a specific amount of money to a specific person within a specific time frame. When applied to real estate financing, also called a Mortgage Note.

ensure that enough funds are collected to cover taxes and insurance premiums.

A lender needs to use PITI to structure mortgage payments in order to

mortgagee

A lender who accepts a mortgage as security for the repayment of a loan.

short sale

A lender-approved sale from which the proceeds are not sufficient to cover the mortgage amount(s).

Purchase Money Mortgage

A mortgage given by the buyer to the seller as a portion of, or for the entire amount of, the purchase price of a property.

cash sale. A mortgage is a form of a cash sale in the sense that the buyer takes out a mortgage loan to pay a seller cash to close the purchase transaction.

A mortgage is a real estate financing form called a(n)

VA-Guaranteed Loan

A mortgage loan made by lenders to eligible veterans that is guaranteed by the Office of Veteran's Affairs, protecting the lender up to specified dollar amounts.

Adjustable Rate Mortgage (ARM)

A mortgage that permits the lender to periodically adjust the interest rate to reflect fluctuations in the cost of money.

soft money

A mortgage where the borrower receives credit instead of actual cash (e.g., a purchase money mortgage).

Mortgage Loan Originator

A person who solicits, negotiates, explains, or finalizes the terms of a mortgage loan for residential real estate.

Mortgage Broker

A person who, for compensation, makes, negotiates, acquires, sells, or arranges for a mortgage loan.

Uniform Residential Loan Application

A standardized form from Fannie Mae or Freddie Mac that lenders require potential borrowers to complete with pertinent information about the borrower and the property.

trigger term

A word or phrase that describes a loan, including the down payment, terms, and monthly payment. If an ad uses a trigger term, disclosures are needed to tell everything about the loan.

Subordination Agreement

A written agreement between lienholders on a property that changes the priority of mortgages, judgments, and other liens.

reconveyance clause

A(n) _______ in a contract obligates the creditor to release part of the property from the lien and convey title to that part back to the debtor once certain provisions of the note or mortgage have been satisfied.

fully amortizing

A(n) ________ loan is repaid with periodic payments of both principal and interest so that the entire loan amount is paid in full at the end of the loan term.

20% down 25-year financing available pay only $650 a month (only acceptable term would be about APR)

According to the Truth in Lending Act, which of the following terms, if used by lender Terry in a mortgage loan advertisement, would require additional disclosure? Select all correct responses.

a conforming loan is the same as a conventional loan

All of the following statements would apply to a lender's explanation of a conforming loan, except for

when interest rates are falling. Marketing a house along with assumable loan financing may make a home purchase more attractive to some home buyers especially if loan rates are rising. Additionally, assuming a loan is less expensive than obtaining a mortgage loan as settlement fees tend to be less, an appraisal is not necessary, and a mortgage recording tax does not need to be paid.

Allison is selling a home that has a $70,000 mortgage loan that needs to be satisfied as part of the purchase transaction. All of the following would help Allison use an assumable loan as a marketing tool, except for

Statutory Right of Redemption

Allows a mortgagor (debtor) to redeem property for a set period of time after a foreclosure sale, regardless of the timing of other events. Time frames for statutory right of redemption vary by state. This is not used in all states.

20% debt/income

Borrower Bob has a gross monthly income of $5,000 and total housing expenses of $1,000. What is Bob's housing debt-to-income ratio?

$865

Borrower Brett is getting a $100,000, fixed-rate, 30-year mortgage loan at 5% interest to purchase a house. The monthly payment of principal and interest is $700. Property taxes are $1,500 per year and the annual insurance premium is $480. What is Brett's monthly PITI payment?

three

Borrowers have a right to a copy of the appraisal report used in the decision process promptly upon completion of the appraisal or no later than ____business days before consummation for closed-end credit or account opening for open-end credit, whichever is earlier.

no

Buyer Teresa takes out a conventional loan with an 80% LTV and also gets a home equity line of credit with a 10% LTV at the same time. Will Teresa be required to purchase private mortgage insurance for a conventional loan that requires an LTV of 80%?

78%

By law, lenders must cancel PMI when the loan-to-value reaches what percent of the property's original value?

DD-214

Certificate of Release or Discharge from Active Duty, or DD-214, issued by the Department of Defense. The DD-214 identifies the character of service and reason for discharge (honorable, dishonorable, etc.).

no. with a stable monthly income of $2,850, and using the front-end ratio of 28%, the maximum mortgage amount for this borrower would be $798, but that is for PITI: Principal, interest, PLUS taxes and insurance. The given figure of $795 covers principal and interest only. Wouldn't you want to know what Chris can actually afford before you show him that $180,000 house?

Chris makes an offer of $180,000 on a house. He has $36,000 to put down. He uses an online mortgage calculator to find that a 30-year conventional loan for $144,000 at 5.25% would make the monthly principal and interest (P&I) about $795. If Chris has a stable monthly income of $2,850 and no debts, would he likely qualify for that loan using the front-end ratio?

graduated payment mortgage

Dave and Sara are a young couple with a new baby who are buying a home. Sara will be working full time at her law firm for the next five years while Dave stays home with the baby and finishes school. In six years, both plan to be full time at the law firm. Which type of mortgage would offer them the best monthly payment plan and tax advantages?

$3,000 (1% of 150,000 = 1500. if she pays two points that is 1500+1500=3000)

Deb offers to buy Stan's home for $180,000, which he accepts. When she applies for a loan, the loan originator tells her that she can borrow $150,000 at 4.75% for 30 years. She can bring the interest rate down to 4.50% if she wants to pay two points upfront. How much would these points cost her?

Diane will not be provided legal protections by a lender. A property appraisal will not be completed to confirm the home's value.

Diane is trying to decide between paying for a new home with cash by either obtaining a mortgage loan or using funds from a cash inheritance. Which of the following are disadvantages of paying with cash from her inheritance versus cash from a mortgage loan that Diane should consider in her decision? Select all correct responses.

20%

Fannie Mae and Freddie Mac require mortgage insurance on home loans with less than what percentage down?

Portfolio Lenders

Financial institutions that make real estate loans that they keep and service in house instead of selling them on the secondary markets.

90% (75% + 15%)

Given: $90,000 75% First Mortgage (primary lender)$18,000 15% Second Mortgage (from seller)+ $12,000 10% Down Payment (from borrower)$120,000 100% Total Sales Price For a second financing for a $120,000 home, what is the combined loan-to-value (CLTV)?

75%. LTV is the first mortgage loan amount divided by the lesser of the sale price or appraisal.

Given: $90,000 75% First Mortgage (primary lender)$18,000 15% Second Mortgage (from seller)+ $12,000 10% Down Payment (from borrower)$120,000 100% Total Sales Price For a second financing for a $120,000 home, what is the loan-to-value (LTV)?

false. Some lenders will "pre-approve" a prospective borrower with just a high-level analysis of their credit-worthiness. To be sure, you should ask to see a pre-approval letter from the lender that provides specific details and verification of what the lender is willing to lend.

If a buyer tells you he has been pre-approved for a loan, you can move forward with confidence that the loan will close.

balloon payment (or straight)

If a mortgage loan payment consists of interest only, the final payment which includes the full amount borrowed is called a

no additional disclosures are required

If an advertisement discloses only the APR, what additional disclosures must a lender include in her advertisement?

$90,000 (90% LTV)

If the sale price of a home is $100,000 on a 90% LTV 30-year fixed mortgage, calculate the PMI using the sample rate card. Use the Fannie Mae/Freddie Mac required 25% coverage at a rate of 0.62%. What is the loan amount?

housing expense ratio

If you use this calculation when evaluating income—PITI / Gross Monthly Income—you have just determined what?

underwriter

Individual who evaluates a loan application to determine its risk level for a lender or investor; final decision maker on a loan application.

Private Mortgage Insurance (PMI)

Insurance offered by private companies to insure a lender against a borrower's default on a loan.

title insurance

Insurance that indemnifies the policyholder against losses resulting from undiscovered title defects and encumbrances.

purchase subject to seller's existing mortgage. A purchase subject to seller's existing mortgage, if allowable, will best meet's Jim's needs in this situation. With a purchase subject to seller's existing mortgage, the buyer does not need to qualify for the needed mortgage loan because the financing transaction does not involve a lender.

Jim lost his job due to his company being merged with another company. He is facing the possibility of his home going into foreclosure, putting him into a dire financial situation. Jim owes a total of $65,000 on his current mortgage that he obtained at a historically low interest rate. Jim has been approached by a person that is interested in buying Jim's home but is not able to qualify for the needed mortgage loan at a competitive interest rate. If allowable, which type of sale would best meet Jim's situation?

cell phone service payment

Johanna wants to get a loan to buy a house. When evaluating her credit obligations, which would a lender LEAST LIKELY consider as debt?

$980

Kelly's gross stable monthly income is $3,500. What is the maximum monthly mortgage payment (PITI) she would qualify for using the housing expense ratio of 28% for a conventional loan?

$720 First you find the annual interest by multiplying the principal by the interest rate: $144,000 x 0.06 = $8,640. Then to find the interest for the first month, you need to divide that by 12: $8,640 / 12 = $720. So of Lonnie's first payment, $720 would be applied to interest.

Lonnie takes out a $144,000 mortgage at an interest rate of 6%. When he makes his very first monthly mortgage payment, how much will be applied to interest?

$3,675 (3.5% of 105,000)

Luther makes an offer of $105,000 on a house that was appraised for $112,000. If the seller accepts his offer, what is the minimum down payment to get an FHA-insured loan?

$2,582.74 FHA allows a maximum payment-to-income ratio of 31%. Dividing the total housing expense by 31%, this loan requires a stable monthly income of $2,582.74 ($800.65 ÷ .31 = $2,582.74).

Mark wants an FHA loan to buy a house. Given a total housing expense (PITI) of $800.65, what is Mark's required stable monthly gross income to qualify for this loan?

pre-approval process

Process by which a lender determines if potential borrowers can be financed through the lender, and for what amount of money.

Deed in Lieu of Foreclosure

Process by which the deed to a property is given by a borrower to the lender to avoid foreclosure.

The lender can charge a flat fee of not more than 1% of the loan amount ($132,000 x 1% = $1,320).

Roy is a veteran who is buying a home with a VA loan. The mortgage loan amount is $132,000. What is the maximum amount the lender can charge for the costs and services for originating the loan?

78%

The Homeowner's Protection Act requires a mortgage lender to cancel PMI when the loan-to-value reaches ____ of the original value and the borrower is current.

loan estimate

The disclosure of loan terms, annual percentage rate and other credit costs, and estimated settlement costs that must be given to borrowers within three business days of a completed loan application in order to satisfy provisions of the Truth in Lending Act and the Real Estate Settlement Procedures Act.

mortgage

The document that creates a lien against real property as security for the promise to repay a loan is called a(n)

Mortgage Insurance Premium (MIP)

The fee charged for FHA mortgage insurance coverage. Initial premium can be financed, and there is a monthly premium. Also called Upfront Mortgage Insurance Premium (UFMIP).

Intermediation

The flow of funds through financial intermediaries (such as banks and thrifts) on its way to borrowers. Money deposited at financial institutions that make the money available to corporate borrowers is an example of intermediation.

yes

The lender is willing to lend $129,200 on the sale price of $161,500. The prospective buyer has $34,000 to make a down payment. Is that enough to buy this house?

housing expense ratio

The relationship of a borrower's total monthly housing expense to gross monthly income, expressed as a percentage (Total Housing Expense / Income = Ratio%). Also called Income-to-Payment Ratio or Front End Ratio.

Section 203(b) FHA Loan

The standard FHA-insured loan program. There are no income limits on this type of loan. The borrower must meet all FHA qualifying standards and the property cost must not exceed the maximum FHA mortgage amounts.

DD-214 is the required official military discharge paper.

To apply for a VA guaranteed mortgage, Edward Smith, a veteran of the Armed Forces, needs a current Certificate of Eligibility and

31%

To calculate the maximum monthly payment allowable for an FHA-insured loan using the payment-to-income ratio, lender Keith would take the stable monthly income and multiply by

31%; 43%.

To qualify for an FHA loan, a borrower should have a maximum housing expense ratio of _____and a total debt-to-income ratio of

$169,008 The borrower will save $477.80 per month for 360 months (30-year term x 12 months/year). This equates to a gross savings of $172,008. The borrower paid $3000 in closing costs (escrow, doc prep, etc.) so the net savings is $169,008.

Total Closing Costs ($3000) / Monthly Decrease in Payments ($477.80) = Time to Recoup (Recapture Time) or 6.28 Months Given the information above, if the borrower remains in the home during the full 30-year term of the new loan, what is the dollar amount of his lifetime savings?

Section 502 Loan

USDA Section 502 loan program either guarantees loans made by approved private lenders or makes direct loans if no local lender is available.

seven (or bankruptcies that are more than 10 yrs old)

Under the Fair Credit Reporting Act, consumer reporting agencies generally may not report negative credit information that is more than _______ years old.

seller financing

When a seller extends credit to a buyer to finance the purchase of the property; this can be instead of or in addition to the buyer obtaining a loan from a third party, such as an institutional lender.

assumption

When one party takes over the payments and primary liability for the loan of another party; usually lender approval is needed; also, a release is needed or the original party remains secondarily liable for the loan.

subject to existing

When property is transferred to a buyer along with an existing mortgage or lien, but without the buyer accepting personal responsibility for the debt. The buyer must make the payments to keep the property, but only loses his equity in the event of default.

Occasional overtime

When qualifying for a conventional mortgage loan, which would a lender LEAST LIKELY count as allowable income?

soft money loan. When a seller takes part of the purchase price as a mortgage to help the sale, it is known as a soft money loan, because the borrower receives credit toward the purchase instead of actual cash.

When seller Sue takes part of the purchase price as a mortgage to help the sale, it is known as a(n)

Open Market Operations

When the Federal Reserve Board sells or buys government securities (or U.S. dollars) as a means of controlling supply and demand and confidence in those items.

moderate effects of local real estate cycles. provide lenders with money to make more loans. standardize underwriting guidelines. The secondary market exists to standardize loan qualifying criteria and buy loans from the primary market as a stabilizing influence. The secondary markets do not loan money nor do they accept deposits from consumers.

Which are functions of the secondary markets? Select all correct responses.

mortgage

Which document creates a lien against real property as security for the promise to repay a loan?

promissory note

Which document is evidence of debt, showing who owes what to whom?

life insurance premiums. Alimony, car and retail account payments are a recurring monetary obligation that cannot be canceled. Life insurance premiums may be monthly expenses but are not considered as debts because they can be canceled.

Which of the following is NOT a debt that a lender would include in borrower Vicky's obligations when qualifying her for a loan?

commercial banks Promissory note=financing instrument that evidences a promise to pay; deed of trust=security instrument placing title to real property as security into hands of a disinterested third party; mortgage=conveyance of interest in real property to a lender as security; lien theory=real estate mortgages are regarded as liens; title remains with mortgagor; and judicial foreclosure=court-ordered sheriff's sale of property to repay debt.

Which of the following originates home loans and offers checking accounts?

A second mortgage and a junior mortgage are the same. (because a second mortgage could be considered a senior mortgage to the third mortgage)

Which of these statements is FALSE in an explanation of mortgages and lien position?

Bonds are apt to be less complex than notes. The bond holder is not entitled to a repayment of a mortgage loan.

Which statements are FALSE when a bond is used in lieu of a mortgage note as a promise to pay? Select all correct responses. - Bonds are apt to be less complex than notes. - The bond holder is not entitled to a repayment of a mortgage loan. - Bonds tend to only be issued by sizable borrowers. - A bond used as a promise to pay tends to have a longer term until maturity than a mortgage note.

A borrower can likely get a lower initial interest rate on an ARM than on a fixed-rate mortgage. With a fully amortizing loan, the borrower owes nothing at the end of the loan term.

Which statements are TRUE? Select all correct responses.

purchase money mortgage

With a __________, the seller takes the role of the lender in offering the money to buy the home.

false. the borrower is the mortgagor.

With a mortgage, the borrower is known as the mortgagee.

true

With a purchase money mortgage, the seller takes the role of the lender in offering the money to buy the home.

With the U.S. Department of Agriculture (USDA) Rural Development Loan program, if an applicant meets the income eligibility and the house is in an approved area, she may receive 100% financing based on the appraised value or acquisition cost, whichever is less.

With the U.S. Department of Agriculture (USDA) Rural Development Loan program, if applicant Annie meets the income eligibility and her house is in an approved area, she may receive ____ financing based on the appraised value or acquisition cost, whichever is less.

no. Only the loan-to-value ratio of the first mortgage is considered for PMI, so a borrower with a higher CLTV would not have to pay PMI if the LTV is 80% or less.

Wyatt takes out an 80% conventional loan, and also gets a 10% home equity line of credit at the same time, for a combined loan-to-value of 90%. Will Wyatt be required to purchase private mortgage insurance?

128,000 (80% of 160,000)

You are pre-qualifying a buyer for a conventional loan on a house with the purchase price of $160,000. She states she does not want to pay PMI on the loan. In that case, what is the maximum loan amount she can receive (assuming no lender-paid PMI)?

ginnie mae's Ginnie Mae's mortgage-backed securities are the only ones that carry the full faith and credit guarantee of the United States government.

_______ mortgage-backed securities are the only ones that carry the full faith and credit guarantee of the United States government.

When meeting with a potential borrower, all of the following features would be included in a lender's explanation of a typical conventional mortgage loan, EXCEPT

partially amortizing

point

1% of the loan amount. A fee charged by a lender for making a loan, calculated based on the loan amount.

abstract of title

A brief, chronological summary of the recorded documents affecting the title to a particular parcel of real property.

cash sale

A buyer gives the seller cash at closing in exchange for clear title to the home.

interest

A charge a borrower pays to a lender for the use of the lender's money.

Prepayment Penalty Clause

A contract clause that gives a lender the right to charge the borrower a penalty for paying off a loan early.

strict foreclosure

A foreclosure action where the court establishes a date by which the borrower must pay the balance in full; once the deadline passes, the lender is awarded title to the property. This type of foreclosure is uncommon.

sheriff's sale

A foreclosure sale held after a judicial foreclosure. Sometimes called an Execution Sale.

discount point

A form of pre-paid interest that is charged by a lender to increase the yield on a lower-than-market interest rate loan; one point equals 1% of the loan amount. Also called Point.

Equal Credit Opportunity Act (ECOA)

A law that requires all lenders to make credit available with fairness and without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

judicial foreclosure

A lawsuit filed by a lender or other creditor to foreclose on a mortgage or other lien; a court-ordered sheriff's sale of the property to repay the debt.

accleration clause

A lender includes a provision in a mortgage document stating that the lender can declare the entire loan balance due and payable immediately if borrower defaults. This clause is described as:

conventional loan

A loan made by an institutional lender or a private party with real estate as security for the loan that the government neither guarantees nor insures.

conventional loan

A loan made by an institutional lender or a private party with real estate as security for the loan. The government neither guarantees nor insures conventional loans.

open ended mortgage

A mortgage allowing the borrower to request more funds from the lender, up to a certain pre-defined limit, without having to renegotiate the loan.

alienation clause

A mortgage clause allowing the lender to demand the full and immediate payment of the mortgage because the owner transferred or pledged to transfer ownership of the property. Also called Due on Sale Clause.

Straight Note

A note that calls for payments of interest-only during the term of the note with a balloon payment at the end of the loan term to pay off the principal amount.

mortgagor

A person who borrows money and gives a mortgage to the lender as security for repayment.

false. it is 1% of the loan amount.

A point is equal to 1% of the sales price of the property.

Government-Sponsored Enterprise (GSE)

A privately held corporation with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy.

appraisal

A professional estimate or opinion of the value of a piece of property (parcel of land), as of a certain date, that's supported by objective data.

straight note

A promissory note calling only for payment of interest during its term is a(n)

deed of trust

A security instrument placing into the hands of a disinterested third party a specific financial interest in the title to real property as security for the payment of a note. Also called Trust Deed.

mortgage

A security instrument that creates a voluntary lien on real property to secure repayment of a debt.

lien theory

A state in which real estate mortgages are regarded as liens; title remains with the mortgagor as long as no default occurs.

yield spread premium

A tool that mortgage lenders can use to lower the upfront closing costs for a borrower.

PITI

A typical mortgage payment that includes Principal, Interest, Taxes, and Insurance. It would also include any homeowners association fees required as a condition of ownership.

Statutory Right of Reinstatement

A way for borrowers to cure the default by bringing the mortgage current—including all accumulated costs and fees—between the time they receive a notice of foreclosure and the time a foreclosure action is filed.

lock-in agreement

A written or electronically transmitted agreement between a lender and an applicant for a mortgage loan which, subject to the terms set forth in the agreement, obligates the lender to make a mortgage loan at a specified rate and a specific time period.

installment

A(n) _____note calls for payments of principal and/or interest at designated intervals.

Growth Equity Mortgage (GEM)

fixed-rate mortgage set up like a 30-year conventional loan, but payments increase regularly. Also called: Rapidly Amortizing Mortgage.

debt service

he amount of money paid in regular intervals toward reducing the principal and interest owed on a debt.

$910 Using the payment-to-income ratio, we get $980. But using the debt-to-income ratio, we find: $3,500 (income) multiplied by 0.36, which equals $1,260. From that, you subtract monthly debts ($250 + $100) which total $350 (the gym membership is not considered a debt since it can be canceled). So, this leaves $910.

Abe's stable monthly income is $3,500. Every month he pays: $250 car payment, $100 student loan payment, and $50 gym membership. What is the maximum monthly mortgage payment he would qualify for on a conventional loan (assume a payment-to-income ratio of 28% and a debt-to-income ratio of 36%)?

sales with assumption

Adam lives in a popular up-and-coming community and an investor has approached him about buying his home. The offer could not come at a better time as Adam had just made a decision to move to another state to help with his parents' care. Adam has an FHA loan with a great rate that the investor is not able to match in the current lending environment. Adam does not want to maintain liability for the loan. Given the situation, what is the BEST financing option?

part-time earnings that have been part of income for at least 3 months

All of the following are durable sources of income that a lender is likely to include in determining a borrower's stable monthly income, EXCEPT

true

t or f? The Federal Reserve can encourage borrowing by lowering the reserve requirement.

Securitization

the act of pooling mortgages and then selling them as mortgage-backed securities.

lien position

the order in which liens are paid off out of the proceeds of a foreclosure sale.

Consumer Financial Protection Bureau (CFPB)

An independent government agency within the Federal Reserve System with rulemaking and enforcement authority over many consumer financial laws. Established under Title X of the Dodd-Frank Act.

false. everything is true except that it is not the most common type of loan payment used today. that would be fully amortized.

An installment note requires periodic payments of the principal amount only, with a balloon payment at the end of the loan term to pay off the balance due, as well as interest and fees. This is the most common type of home loan payment structure used today.

Savings and Loan Association

An institution whose primary function is to promote thrift and homeownership. All savings and loan associations must be chartered, either by the federal government or by the state in which they are located. Federally chartered savings and loan associations are owned by the depositors.

equity

An owner's unencumbered interest in his or her property. Home equity is the portion of a home's current value minus the loan balance secured by the home.

on all FHA loans

An upfront mortgage insurance premium is required

junior mortgage

Any mortgage with a lower lien position than another.

increases

As a borrower pays down his mortgage loan, the equity

$77,600 Where veterans have only partial entitlement, the maximum guaranty will be the lesser of either 25% of the loan amount or 25% of the county loan limit minus previous entitlement used and not restored. In this case, 25% of $400,000 (loan amount) = $100,000 or 25% of $510,400 (county limit) - $50,000 (entitlement used) = $77,600 remaining entitlement. The maximum guaranty is $77,600.

Assume borrower Jackie used $50,000 of entitlement on a prior VA-guaranteed home loan, which was not restored. She now wants to purchase another home with a loan amount of $400,000 in an area with a county limit of $510,400. What is the amount of the maximum guaranty for this loan?

49,956.64

Balance after 1st month: $49,985.69 2nd month: $49,985.69 x .12 = $5,998.28$5,998.28 ÷ 12 = $499.86 interest$514.31 - $499.86 = $14.45 principal$49,985.69 - $14.45 = $49,971.24 Balance after 2nd month: $49,971.24 Here's what you know about this loan after the second month. Let's do one more calculation. You know that the principal balance after the second month is $49,971.24. The interest rate on this 30-year loan is 12% and monthly payments are $514.31. What is the balance of the loan after the third monthly payment?

seek a deficiency judgement against becca

Becca owes $145,000 on her mortgage loan and back property taxes of $5,400. The bank foreclosed on the property, selling it for $140,000 at a sheriff's sale. The costs associated with the proceeding were $1,200. If the bank wants to recover the balance of what Becca owes, it can

cancel the contract and look for another house and clear the lien by paying the $8,000 or negotiating for a lesser amount. Since there is a mortgage involved, the mortgage company would never allow a lien to remain on the property that would absolutely affect their lien position.

Bill Jones signs a contract for the purchase of a single-family house for $350,000 and applies for a mortgage loan for $280,000. While performing a search, the title company retained by the mortgage company discovers that a previous owner had minor construction done on the property but never fully paid the contractor. As a result, there is a mechanic's lien filed against the property in the amount of $8,000. Which of the following actions can Bill take? Select all correct responses.

The monthly PITI payment is $1,650 $1,073 P&I + $325 monthly property tax ($3,900 / 12) + $72 monthly insurance premium ($864 / 12)

Borrower Natalie is getting a $200,000, fixed-rate, 30-year loan at 5% interest to purchase a condominium. The monthly payment of principal and interest is $1,073. Property taxes for this property are $3,900 per year. An annual homeowner's insurance policy is $864. The monthly condo association fee is $180. What is Natalie's monthly PITI payment?

$5400 Points are based on the loan amount of $135,000 ($150,000 - $15,000 down payment). The lender is charging a total of 4 points, or 4% of the loan. Discount points total $2,700 ($135,000 x .02) and the loan origination fee is $2,700 ($135,000 x .02). The total the lender will receive in points is $ 5,400 ($2,700 + $2,700).

Borrower Tim wants to buy a $150,000 home and is going to make a $15,000 down payment. Tim is seeking a conventional loan but doesn't want to pay more than 6.5% interest. The lender agrees to 6.5% interest based on two discount points and a loan origination fee of 2%. What is the total amount of points (in dollars and percentage) that the lender will receive for making this loan?

Straight

Cameron obtains a 5-year loan for $22,000 at 8% interest to build a pole barn on the back of his lot. He pays the bank $146.67 every month, which covers only the interest on the loan. At the end of five years, he has a $22,000 balloon payment. What kind of loan does Cameron have?

refuse to let Cathy give away the property. Upon sale of, or even a transfer of significant interest in the property, the lender has certain rights, but it cannot keep Cathy from selling or transferring ownership.

Cathy has a mortgage with an alienation clause. She deeds her property to her brother John and he assumes her mortgage. The alienation clause does NOT give the lender the right to

yes

Cathy is applying for a loan to purchase a condominium. Would a lender include her monthly condo association fees as part of the PITI?

usury

Charging a higher interest rate than the law allows.

he doesnt need to occupy the home

Connor is a military veteran. When discussing a VA-guaranteed mortgage loan as a financing option for the purchase of a new home, which of the following features does lender Lily not need to include in her explanation to Connor?

96.50%

Darlene is getting an FHA-insured loan to purchase a house. The purchase price is $278,000, and she's paying the minimum 3.5% down. She will have to pay an upfront mortgage insurance premium of $4,865, which will be financed as part of the loan. What is the loan-to-value on this loan?

Lori, who is borrowing $150,000 to purchase a house for $200,000 Private mortgage insurance (PMI) is required on conventional loans that have a loan-to-value in excess of 80%. Lori's loan-to-value is 75% ($150,000 / $200,000 = .75 or 75%), so she will not have to pay PMI. Kevin and Maurice have LTVs above 80%.

Each of these borrowers is getting a conventional loan. Who will NOT be required to pay PMI?

Truth in Lending Act (TILA)

Federal law that requires disclosure of the terms of credit by a creditor to a prospective borrower. Implemented by Regulation Z, which is under the oversight of the Consumer Financial Protection Bureau.

false

For an FHA or conventional mortgage loan, a real estate licensee might use the front- and back-end qualifying ratios to pre-approve a buyer client.

28% total housing expense ratio 36% total debt-to-income ratio

For lender LuAnn to meet the conforming loan standards of Fannie Mae/Freddie Mac, the loans she submits need to meet which of the following qualifying ratios? Select all correct responses.

purchase money mortgage (PMM)

Generally describes a mortgage used to finance the purchase of property; may specifically refer to a situation where the seller finances all or part of the sale price of a piece of property for the buyer.

First, you find the annual interest by multiplying the principal by the interest rate: $144,000 x 0.06 = $8,640. Then to find the interest for the first month, you need to divide that by 12: $8,640 / 12 = $720. So of Geoff's first payment, $720 would be applied to interest.

Geoff takes out a $144,000 mortgage at an interest rate of 6%. When he makes his very first monthly mortgage payment, how much will be applied to interest?

90

How many days delinquent must a borrower be with the payment of a mortgage loan before most lenders enforce an acceleration clause?

$70,000 Cindy will pay $70,000 in interest for that 30-year loan (500 x 12 months x 30 years = $180,000 total payment - $110,000 principal = $70,000 interest).

If Cindy pays $500 for P&I every month for 30 years on her $110,000 loan, how much interest will she pay over the life of the loan?

360

If a balloon loan is expressed as "360/120", the ____ states the term of the loan.

$46.50 ($558.00 ÷ 12 = $46.50)

If the fee due at loan closing is $558, how much will be added to the borrower's monthly mortgage payment?

Sam found the amount paid on principal by subtracting the interest paid from the monthly payment ($1,073.64 - $833.33 = $240.31). When you then subtract the principal reduction of $240.31 from the original balance of $200,000, you find that the balance of the loan after one month is $199,759.69. Remember: As the principal amount is reduced, the amount applied to interest will also reduce. Let's hear from Sam again.

If the original balance of the loan was $200,000, what will the balance be after one month? (Remember, the monthly payment is $1,073.64 P&I with $833.33 applied to interest.)

$558 (0.0062 rate card factor x $90,000)

If the sale price of a home is $100,000 on a 90% LTV 30-year fixed mortgage, calculate the PMI using the sample rate card. Use the Fannie Mae/Freddie Mac required 25% coverage at a rate of 0.62%. What is the fee due at loan closing?

real property tax lien.

In North Carolina, the lien on real estate that takes priority over all other liens is a

accleration

In a judicial foreclosure, what clause allows a lender to declare the entire loan balance due immediately because of borrower default?

judicial foreclosure. Lien theory states generally require judicial foreclosure where all proceedings must go through the court.

In a lien theory state, what foreclosure process generally must be followed?

higher than the interest rate

In talking to a buyer about the difference between interest rate and APR, a licensee may say that the APR on a loan is typically going to be

true. In title theory states, while the debt is outstanding, the lender (or the lender's trustee) holds legal title to the property through a deed of trust. In lien theory states, a mortgage is the security instrument that creates a lien against the property that must be repaid by the debtor.

In title theory states, while the debt is outstanding, the lender (or the lender's trustee) holds legal title to the property through a deed of trust.

The home buying process for Jackie will be faster. Jackie will not need to abide by lender rules and requirements.

Jackie is wavering between purchasing a property by obtaining a mortgage loan or using funds from personal stocks to pay for a new home. Which of the following are advantages of paying with cash from her stocks versus paying cash from a mortgage loan that Jackie should consider in her decision? Select all correct responses.

5.5% (9515 / 173000)

Jaycee takes out a $173,000 loan. The annual interest is $9,515. What is the interest rate on this loan?

4.5%

Jenny takes out a $230,000 loan. The annual interest is $10,350. What is the interest rate on this loan?

enormous credit card debt. Enormous credit card debt indicates the seller is careless about money management, which will likely cause the lender to reject a short sale application.

Jeremy must give the lender a valid reason for his short sale request. Which is LEAST LIKELY to be considered a valid reason by the lender?

$3600 A point is 1% of the loan amount. Since Joe made a $30,000 down payment, the loan amount is $120,000. One point on this loan equals $1,200 ($120,000 x 0.01), so three points is $3,600.

Joe buys a house for $150,000, making a $30,000 down payment and paying three discount points to buy down the interest rate. What is the total cost of the discount points?

If $120 of the $367.50 payment was applied to principal, the interest was $247.50 ($367.50 - $120). To find annual interest, multiply that by 12: $247.50 x 12 = $2,970. And if $120 of that payment went to principal, the balance of the loan when the payment was made was $36,000. To find the interest rate then, divide the annual interest by the principal balance: $2,970 / $36,000 = 0.0825 or 8.25%.

Joe makes a payment of $367.50 on his loan, of which $120 went to principal. After the payment is applied, the balance on Joe's loan is now $35,880. What is the annual percentage rate on Joe's loan?

decrease / up

Large-scale disintermediation can ______ the mortgage money supply and cause interest rates to go ______.

3

Lender Karissa must provide a copy of the Loan Estimate to borrower Andy no later than how many business days after she receives Andy's completed application?

40,000

Lender Louis is willing to lend Kathy $160,000 on the sale price of $200,000. Kathy needs how much for a down payment to buy this house?

$14.31

Let's walk through another example of calculating principal and interest over the course of a few months. A mortgage loan in the amount of $50,000 at a rate of 12% has been granted for a period of 30 years, with monthly payments due of $514.31. What is the principal portion of the first monthly payment?

statutory redemption

Lets a mortgagor redeem property for a set period of time after a foreclosure sale, regardless of the timing of other events. Time frames for statutory right of redemption vary by state. This is not used in all states.

may 30

Lisa applied for a loan with XYZ Bank on May 1. XYZ Bank must send Lisa a written explanation of its decision by

when interest rates are falling

Lydia is selling a home that has a $90,000 mortgage loan that needs to be satisfied as part of the purchase transaction. All of the following are buyer benefits that may help Lydia use a purchase subject to seller's existing mortgage as a marketing tool for the sale of her home, EXCEPT

128000

Marcia wants to buy a house that is selling for $160,000 and the lender has approved her for an 80% conventional loan. How much can Marcia borrow?

act as intermediaries between borrowers and lenders.

Mortgage brokers

30

Mortgage lenders must notify applicants of a credit status and reasons for action taken within ____ days of receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application.

$1,512

Nicole has a stable gross monthly income of $5,400; her monthly bills include a car payment of $420 with seven payments left and a student loan payment of $220. What is the maximum mortgage payment (PITI) she would qualify for under both qualifying ratios if she is getting a conventional loan?

the homeowner expects to be laid off from his job

Of these, which do you think would LEAST LIKELY qualify as financial hardship for a homeowner seeking a short sale?

false

One purpose of the primary mortgage market is to buy loans from banks to free up money to make more loans available.

true

PITI is an acronym for a typical mortgage payment that is the sum of monthly principal, interest, taxes, and insurance.

loan estimate

Patricia is a first-time homebuyer, and she is applying for a loan. What document must her lender provide at the time of application or within three business days after completing the loan application?

amortization

Payment of debt in regular, periodic installments of principal and interest over a defined period of time.

Graduated Payment Mortgage

Payment structure that allows the borrower to make smaller payments in early years of the mortgage, with payments increasing on a scheduled basis at a predetermined point until they are sufficient to fully amortize the loan over the remainder of its term.

$119,891.52

Peter's 30-year mortgage is for $120,000 with an interest rate of 6.5%. Every month, he will be required to pay the bank $758.48 in P&I. What is the principal balance after Peter's first payment?

fixed rate

Potential borrower Nicky has asked lender Victor to describe the features of a TRADITIONAL conventional mortgage loan. Select a feature that should be included in Victor's description.

Secondary Market

Private investors and government enterprises and agencies that buy and sell mortgages.

the loan has been paid down to 78% or less of the property's current value.

Private mortgage insurance is NOT required on a conventional loan when

Annual Percentage Rate (APR)

Relationship between the cost of borrowing and the total amount financed, represented as a percentage.

$1,874.8

Ron needs to finance $215,000 to get the house he wants. He'd like to get a 15-year mortgage, and the lender quotes him an interest rate of 6.5%. Using the Amortization Table for Monthly Payment Per $1,000 of Loan, what is the estimated monthly P&I payment for that loan?

$160,000 (use the lower of the two, sales price or appraised value)

Seller Kathy accepts buyer Gary's offer of $200,000 to buy her home. The appraisal on the property comes in at $206,000. If the lender requires an LTV of 80%, how much is the lender Louis willing to lend?

title theory

States in which a mortgagee holds actual title to property until the loan is repaid.

10 years

The Fair Credit Reporting Act provides that derogatory information regarding a discharged bankruptcy be removed after

ten

The Fair Credit Reporting Act provides that derogatory information regarding a discharged bankruptcy be removed after ____ years.

false. The FHA was not set up to fund loans. It provides mortgage insurance so banks don't incur losses for home loan defaults.

The Federal Housing Administration was created to make loans to low-income borrowers.

managing the supply of money

The Federal Reserve (or the Fed) is responsible for

three

The Loan Estimate must be given no later than ____ business days after lender Luther receives a consumer's completed application.

TRID Rule

The TILA-RESPA Integrated Disclosure rule, issued by the Consumer Financial Protection Bureau to create standardized, consumer-friendly disclosure documents, including the Loan Estimate (which integrates the initial Truth in Lending Statement and the Good Faith Estimate) and the Closing Disclosure (which integrates the final Truth in Lending Statement and the HUD-1 Settlement Statement).

two year period

The URLA requires the borrower to provide details about all current and previous employment over a(n)

25%

The VA provides guaranty on eligible home loans for up to ______ of the loan amount.

trustee

The _____ holds legal title to the security property described in the deed of trust, subject to the terms of the trust for the benefit of the lender.

lock-in agreement

The ______ is a commitment guaranteed by lender Sue that an interest rate will not change on borrower Wade's mortgage loan for a specific period of time.

mortgage (promissory) note

The _______ provides the evidence of debt and the mortgage provides the creditor security for the note.

consumer financial protection bureau

The _______ was created by Title X of the Dodd-Frank Act as an independent entity within the Federal Reserve.

residual income

The amount of a borrower's income remaining after subtracting taxes, housing expenses, and all recurring debts and obligations; a factor when qualifying prospective borrowers for VA-guaranteed loans.

principal

The amount of a debt, excluding interest due.

Loan-To-Value Ratio (LTV)

The amount of money borrowed, compared to the value (or price) of the property.

loan to value

The amount of money borrowed, compared to the value (or price) of the property.

effective rate of interest

The annual percentage rate (APR) is also referred to as

mortgagor. The borrower who pledges property as collateral is called the mortgagor. The lender is called the mortgagee.

The borrower who pledges property to a lender as collateral is referred to as the

81% The LTV is calculated as $129,200 (loan amount) divided by $159,500 (appraised value) = .81 or 81%. You remembered that the LTV is calculated on the lower of the sales price or the appraised value. If the lender requires an 80% loan-to-value ratio, the lender would not make this loan.

The buyer has a $32,300 cash down payment. The sales price of the property is $161,500, so the buyer is looking at a mortgage of $129,200. What if the property appraisal came in, instead, at $159,500? What is the loan-to-value ratio for this transaction?

deficiency judgement

The debt that remains due and payable by the borrower after a sheriff's sale of property.

upon final payment, the mortgage is satisfied, canceled, or void, and the title is re-vested from mortgagee to mortgagor.

The defeasance clause ensures that

Entitlement

The maximum dollar amount of loan guarantee to which an eligible veteran is entitled.

Disintermediation

The movement of money out of savings accounts and into higher yield investments, such as corporate securities or government instruments.

Reserve Requirement

The percentage of customers' deposits that commercial banks are required to keep on deposit, either on hand at the bank or in the bank's own accounts; in other words, money the bank cannot lend to other people.

uniform residential appraisal report

The predominant appraisal report form you will likely see used by an appraiser hired by residential mortgage loan originator is the

underwriting

The process of a lender analyzing the security and a borrower to determine the risk of a loan.

Underwriting

The process of evaluating and deciding whether to make a new loan and on what terms.

pre-qualification

The process of pre-determining how much a potential homebuyer might be eligible to borrow.

foreclosure

The process used by a lienholder to force a property to be sold so that the proceeds of the sale can be applied toward debt satisfaction.

combined loan-to-value

The relationship between the unpaid principal balances of ALL mortgage loans and the appraised value (or sales price if it is lower) of the property.

total debt-to-income ratio

The relationship of a borrower's total monthly debt to gross monthly income, expressed as a percentage (Total Debt / Income = Ratio %). Debt obligations include housing and long-term debts with more than 10 payments remaining. Also called Total Debt Service Ratio or Back End Ratio.

equitable right of redemption

The right of a debtor to redeem property from foreclosure proceedings prior to confirmation of sale.

equitable right of redemption

The right of a debtor to redeem the property from foreclosure proceedings prior to a confirmation of sale is called

equitable right of redemption

The right of a debtor to redeem the property from foreclosure proceedings prior to a confirmation of sale.

77% (120,000 / 155,000)

The sale price of the property is $160,500 and the buyer wants to borrow $120,000. The property was appraised at $155,000, and the lender requires an 80% conventional loan-to-value ratio. What is the loan-to-value ratio (LTV) for this transaction?

129,200 The lender will use the sales price of $161,500 to consider the loan because it is less than the appraised value. With an LTV of 80%, the buyer could borrow $129,200 ($161,500 x .80 = $129,200).

The seller accepts a buyer's offer of $161,500 to buy a home. The appraisal on the property comes in at $163,000. If the lender requires an LTV of 80%, how much is the lender willing to lend?

follow the underwriting guidelines of the secondary market agencies.

To sell loans to Fannie Mae, the primary market lender must

power of sale

What is the clause that allows the lender to sell the property, in the event of default, to pay the debt the borrower owes without going through the courts?

The lender files a notice of foreclosure. The first thing that must happen is that the lender files a notice of foreclosure in the county in which the property is located. That notice must be served on the borrower before the foreclosure clock starts ticking.

What is the first step necessary to kick off a judicial foreclosure proceeding?

$53,600

What is the required down payment if the purchase price is $268,000 and the lender will approve a loan-to-value ratio of 80%?

title insurance

What provides the best protection against loss or damages from defects in title?

A VA-guaranteed loan looks at total debt service ratio as well as an additional qualifying component based on residual income.

What type of loan considers residual income in addition to total debt service ratio when qualifying borrowers?

Pre-qualification of a borrower is not binding on the lender. A real estate licensee or mortgage broker cannot give a borrower a pre-approval. With a pre-approval, a lender is rendering a credit decision.

When explaining to a buyer the difference between the pre-qualification and pre-approval stages of the mortgage loan application process, which statements are TRUE? Select all correct responses.

when interest rates are high. Generally, as interest rates rise, so does the popularity of ARMs.

When is a borrower more likely to consider an adjustable-rate mortgage (ARM)?

taxes and insurance Lenders generally require borrowers to establish an escrow account—sometimes called an impound account—into which the borrower makes periodic payments to cover the property taxes and property insurance that is owed.

Which elements of a borrower's monthly mortgage payment are maintained by a lender in an escrow account?

federal reserve

Which entity is responsible for setting the country's monetary policy and thereby affecting interest rates on mortgage loans?

provide financial support to low-income homebuyers in rural communities provide financial support to a rural area that has experienced a devastating natural disaster

Which of the following accurately describes the purpose of a USDA Rural Development Loan? Select all correct responses.

Level payment loans are popular alternative financing tools when rates are low. Level payment loans may help borrowers budget and manage payments.

Which of the following are TRUE statements when comparing a loan with a level payment to one with a fluctuating payment?

graduated payment mortgage

Which of the following loans have payment plans that tend to have a lower initial monthly payment that creates negative amortization?

notice of foreclosure; reinstatement period; foreclosure action; redemption period; sheriff's sale

Which sequence of events BEST represents the steps in a judicial foreclosure?

A 3.5% minimum down payment is required.

Which statement about VA-guaranteed loans is FALSE?

pre-approval can improve a buyers negotiating position

Which statement about pre-approval of a buyer is TRUE?

An underwriter is responsible for evaluating and deciding whether to make a new loan and on what terms.

Which statement about the loan process is TRUE?

FHA loans are targeted to lower-income borrowers or first-time homebuyers only.

Which statement is FALSE as it relates to an FHA-insured loan?

The bond holder is not entitled to a repayment of a mortgage loan.

Which statement is FALSE when a bond is used in lieu of a mortgage note as a promise to pay?

An alienation clause requires the borrower to repay the entire loan if he sells the property.

Which statement is TRUE?

All homeowners must receive lender approval. Not all lenders accept short sales. Proof of financial hardship must be met.

Which statements are TRUE as they relate to short sales? Select all correct responses.

Bonds are apt to be more complex than notes. Bonds tend to only be issued by sizable borrowers. A bond used as a promise to pay tends to have a longer-term until maturity than a mortgage note.

Which statements are TRUE when a bond is used in lieu of a mortgage note as a promise to pay? Select all correct responses.

Before a lender will finance the purchase of a house, the borrower must sign a mortgage note. A mortgage note is a document that an individual signs promising to pay the other person. A mortgage is a document that an individual signs with a lender. A mortgage pledges the property against the money that is borrowed.

Which statements are TRUE when comparing a mortgage to a mortgage (promissory) note? Select all correct responses.

true

With a trust deed, the trustee has the authority under the terms of the trust to commence a non-judicial foreclosure action when the lender has declared the loan to be in default.

margin

With an ARM, the index is added to the ______ to determine the adjustable interest rate charged.

trust deed

_____ is BEST defined as a security instrument placing into the hands of a disinterested third party a specific financial interest in the title to real property as security for the payment of a note.

lien

a right to keep possession of property belonging to another person until a debt owed by that person is discharged.