Chapter 6

For a loan amount of $400,000, one discount point would be equal to one percent of the downpayment. one percent of the sales price. $400 $4,000

$4,000

In exercising the power of sale in a trust deed, at least ________ days must elapse after recording the notice of default before the trustee may hold a sale. 90 120 180 240

120

How many parties are there to a deed of trust? 1 2 3 4

3

As a general rule, which of the following items are included in the 28% qualifying ratio for a residential loan? Principal Interest Taxes Insurance A, B, C, and D A, B and C only A and B only None of the abov

A, B, C, and D

In real estate lending, the letters "ARM" stand for: Appraised Remodel Mortgage. Ability to Repay Mortgage. Annuity Return on Mortgage. Adjustable Rate Mortgage.

Adjustable Rate Mortgage.

A mortgage banker can do which of the following? Service loans for its clients. Use its own money to make loans. B only Both A and B A only Neither A nor B

Both A and B

Loan processing includes an analysis of which of the following? The value of the collateral The borrower's credit Both A and B A only B only Neither A nor B

Both A and B

The Oregon Department of Veterans Affairs Loan Program: provides residential mortgage loans at below market interest rates to qualifying war veterans. receives funds for making mortgage loans to veterans through bond issues. B only A only Both A and B Neither A nor B

Both A and B

A discharged serviceperson who wants to get a VA loan must first get a Certificate of Eligibility from the Oregon Department of Veterans' Affairs. Certificate of Eligibility from the Department of Veterans Affairs. Separation from the Defense Department. Certificate of Reasonable Value from the Federal Housing Administration.

Certificate of Eligibility from the Department of Veterans Affairs.

Which of the following is NOT a secondary mortgage market? FNMA GNMA FDIC FHLMC

FDIC

Consumer spending is negatively affected by a decrease in the reserve ratio requirements of member banks of the Federal Reserve. True False

False

Under a trust deed, the trustee and beneficiary can be the same party. True False

False

When demand exceeds supply, the price of goods and services will decrease. True False

False

Which is a type of security instrument? Promissory note Mortgage

Mortgage

In a lien theory state, who holds title to real property when a mortgage is given?

Mortgagor

Which statement about discount points is FALSE? They are computed as a percentage of the selling price. They are used to buy down interest rate. They are a function of the marketplace. They are paid by either the buyer and seller.

They are computed as a percentage of the selling price.

For a real estate broker to assist clients on real estate related decisions it is important for the broker to understand local and national economic indicators. True False

True

GDP measures the total spending by consumers, total investment by business, total spending by the government, and net exports True False

True

*Which party CANNOT bid for a property at a trustee's sale? The defaulting borrower Third parties Trustee The lender

Trustee

The higher the loan-to-value ratio, the lower the:

borrower's equity.

Which is likely to have the greatest affect on your real estate business? The national economy. Your local economy. The GDP. The world economy.

local economy

After the trustee's sale is held and the property has been sold to the highest bidder, the grantor has: 120 days equity of redemption. 90 days equity of redemption. one year to redeem the property. no recourse.

no recourse.

Which of the following is NOT a negotiable instrument? Check Trust deed Promissory note Draft

*Draft Trust deed

The real estate business is affected by the economy. The total of all goods and services produced in the US is measured by the gross domestic product (the GDP). The business cycle is the recurring pattern of expansions and contractions within the economy. It's called a recovery when the economy expands and a recession when it contracts. Only some parts of the statement are true. The entire statement is true. The entire statement is false.

*Only some parts of the statement are true. The entire statement is true.

Which statement about real property is TRUE? Real property is non-tangible, non-homogenous, and non-distinguishable for any other property. Real property is non-homogeneous, it is distinguishable from any other piece of property, and it is tangible. Real property is tangible, homogeneous, and always has a fee-tail. Real property is tangible, and is non-homogeneous, and each piece is not unique.

*Real property is tangible, homogeneous, and always has a fee-tail. Real property is non-homogeneous, it is distinguishable from any other piece of property, and it is tangible.

The secondary mortgage market functions to enable primary lending institutions to free the funds they have invested in mortgage loans by selling those mortgages to lenders having capital available for real estate investments. minimize fluctuations in the supply of funds available to meet mortgage loan demand. A only B only Both A and B Neither A nor B

Both A and B

What happens when reserve requirements are raised for banks? More money is made available for lending. Interest rates go down. Interest rates go up. The economy heats up.

Interest Rates go up

All of the following statements are TRUE about a jumbo loan, EXCEPT: a jumbo loan exceeds the maximum amount established by the secondary market for conforming loans. a jumbo loan tends to demand a slightly higher interest yield. a jumbo loan is a government loan. a jumbo loan is a nonconforming loan.

a jumbo loan is a government loan.

Most purchasers of homes borrow the necessary funds and pledge the property as security for the debt while they retain possession of the property. This is known as: hypothecation. devise. leverage. conveyance.

hypothecation

The lender in a mortgage is the __________ . mortgagor mortgagee trustee trustor

mortgagee

As major players in the secondary market, the Federal National Mortgage Association (FNMA, "Fannie Mae"), Government National Mortgage Association (GNMA, "Ginnie Mae), and Federal Home Loan Mortgage Corporation (FHLMC, "Freddie Mac") tend to set the standards for the primary market. FHA, VA, and the Federal Reserve are not organizations in the secondary mortgage market. Everything in this statement is true. Everything in this statement is false. This statement is only partially false.

Everything in this statement is true.

The minimum down payment for a federal VA loan is: 0%. 3%. Depends whether the loan is considered a jumbo loan. 5%.

3%.

Which will clear a mortgage from the public record? The note marked "Paid in Full" and returned to the borrower. A properly recorded Satisfaction of Mortgage.

A properly recorded Satisfaction of Mortgage.

Which statement is FALSE? During times of low interest rates the market experiences a high demand for entry-level housing. Low interest rates generate a demand for properties that might not otherwise have been considered for purchase. Interest rates do NOT have a measurable affect on the economy. Low interest rates make loans more readily available to real estate consumers.

Interest rates do NOT have a measurable affect on the economy.

*In the event of default, the ability of the mortgagor to pay the judgment between the time of notification and the time of sale is known as: a mortgage restraining order. Mortgagor's equity of redemption. Stay of foreclosure judgment. Mortgagee's default cure.

Mortgagee's default cure. Mortgagor's equity of redemption.

When does the buyer acquire title when a property is financed under a purchase money mortgage? When 50% of the mortgage has been paid. When the mortgage has been paid in full. On whatever date is stated in the agreement for purchase and sale. On closing.

On closing.

Which of the following best describes the term title in the context of real estate? The collateral used for the borrower's debt A lien against property subject to a mortgage or trust deed Ownership rights held by the owner of the property Executing a note and mortgage or trust deed in favor of the lender

Ownership rights held by the owner of the property

Which serves as evidence of a debt? Promissory note Trust Deed

Promissory note

Which statement is TRUE about trust deeds? The trustor has naked legal title. The beneficiary is the party selling the property. The beneficiary will record the Notice of Default and Election to Sell The trustor is the borrower and owns the property

The trustor is the borrower and owns the property.

In a mortgage foreclosure, the new buyer of the foreclosed property initially gets: a written title. a provisional deed. a deed. a sheriff's certificate of sale.

a sheriff's certificate of sale..

A borrower without any debt wants a home improvement loan using their personal residence as collateral. The loan would NOT be insured or guaranteed by any government agency. The borrower is looking for a securitized loan. 203(b) packaged loan. wraparound loan. conventional loan.

conventional loan.

The interest rate for a real estate mortgage loan is determined by the competition in the lending marketplace. set nightly by the Federal Reserve Board. fixed by federal law through the Federal Housing Financing Administration. fixed by the state real estate commission.

determined by the competition in the lending marketplace.

The most common procedure for foreclosing a trust deed is called: foreclosure by judicial proceeding. foreclosure by entry and possession. strict foreclosure. foreclosure by trustee sale.

foreclosure by trustee sale

Fannie Mae purchases: government guaranteed mortgage loans. government insured mortgage loans. conventional mortgage loans, both insured and uninsured.

government guaranteed mortgage loans.

Construction financing is usually designed as

high interest, short term loans.

To a buyer, the greatest advantage of an FHA loan is: assurance of an FHA appraisal to make sure the price is fair. below market interest rates. assurance that property conforms to minimum property requirements. low down payment.

low down payment.

The primary mortgage market is the market that prohibits lending for second mortgages. originates mortgage loans. buys and sells existing mortgage loans. provides mortgage insurance for existing mortgage loans.

originates mortgage loans.

*Violation of RESPA's anti-kickback, referral fees, and unearned fee rule may subject a licensee to: a fine up to $10,000. imprisonment for up to 1 year. the ability of the borrower to recover up to three times the amount of the charge paid. REA disciplinary action. 1, 2, and 3 1 and 2 1 and 3 1, 2, 3, and 4

*1 and 2 *1, 2, and 3

*The "holder in due course" is one who has accepted a note: which appears to be regular. before it was past due and without notice of previous dishonor. in good faith and for valuable consideration. A and B only A and C only A only A, B, and C

*A and C only

*A borrower gave a lender a mortgage, pledging the property as security for a loan. The borrower: conveyed equitable title to the lender. voluntarily gave the lender a lien on the property. A only B only Both A and B Neither A nor B

*Both A and B

*A mortgage broker: takes applications and arranges loans with lenders. is a lender. Both A and B A only B only Neither A nor B

*Both A and B

Which of the following would not be purchased by the Federal National Mortgage Association? Chattel mortgages. Conventional mortgages. FHA mortgages. VA guaranteed mortgages.

*VA guaranteed mortgages *Conventional mortgages.

*The type of lender that invests a major portion of its assets in long-term real estate loans, prefers large loans on commercial properties, and does not like to service its own loans is: a credit union. a savings and loan. a commercial bank. an insurance company.

*a credit union

*A court order directing the sheriff to sell property is called: a deficiency judgment for sale. an attachment. a writ of execution. a notice of lis pendens.

*a notice of lis pendens.

*The purpose of the Truth in Lending Act is to establish credit approval standards for federal loans. assist the federal government in controlling predatory lending practices. disclose to the consumer the cost and conditions of mortgage loan credit. establish a more uniform set of charges.

*assist the federal government in controlling predatory lending practices. disclose to the consumer the cost and conditions of mortgage loan credit.

*Peyton was making regular loan payment then suddenly stopped and defaulted on the mortgage. The mortgage contains an acceleration clause. An acceleration clause allows Peyton's lender to

*demand immediate payment of only the past due payments.

*Giving a deed in lieu of foreclosure is the voluntary act of the trustor. mortgagor. mortgagee. trustee.

*trustor. mortgagor.

Under Regulation Z, a borrower has the right to cancel a residential real estate purchase mortgage within __________ after signing the loan papers. 5 business days There is no right to rescind a residential purchase mortgage. 24 hours 3 business days

3 business days There is no right to rescind a residential purchase mortgage.

Who would you contact if you are a buyer who wants to purchase a primary residence using an FHA loan? The Federal Home Loan Mortgage Corporation. A lending institution approved by FHA. The FHA. The Department of Housing and Urban Development (HUD).

A lending institution approved by FHA.

What is a deed of trust? An involuntary general lien on real property A security instrument similar to a mortgage An involuntary specific lien on real property The document given to a landowner when a lender has been paid in full

A security instrument similar to a mortgage

Loan servicing includes: the collection of loan payment. making sure property taxes are paid. making sure insurance premiums are paid. A only C only A, B, and C Both A and B only

A, B, and C

Which of the following instruments can the seller use for carry-back financing? Trust deed. Purchase money mortgage. Land sale contract. B only C only A, B, and C A only

A, B, and C

Mortgage brokers represent loan products from: one source, such as a specific commercial bank. more than one source, such as multiple commercial banks, mortgage bankers, and savings and loan associations. A only Both A and B B only Neither A nor B

B Only

Under Oregon law, which of the following are true? An owner occupied residential trust deed may be subject to a deficiency judgment if foreclosed by judicial procedure. When a trust deed is foreclosed by judicial foreclosure, it provides for a statutory redemption period. If the property is not owner occupied and a trust deed is foreclosed by judicial procedure, a deficiency judgment may be obtained. B only B and C only A and C only A only

B and C only

The Federal Home Loan Mortgage Corporation (Freddie Mac) was created to: Provide funds for elderly housing needs. Expand the secondary market for mortgages. Both A and B B only A only Neither A nor B

B only

Which of the following statements regarding mortgage brokers is true? After the loan is closed, a mortgage broker usually collects the regular monthly payments for the lender. Mortgage brokers generally make loans with their own funds, then seek to sell these receivables to the highest bidder in the secondary market. B only Both A and B A only Neither A nor B

B only

The purpose of the Federal National Mortgage Association (FNMA) is to: provide an easy vehicle for channeling capital into housing. increase the liquidity of primary lenders' loan portfolios. B only Both A and B A only Neither A nor B

Both A and B

If the foreclosure sale proceeds are less than the outstanding debt and foreclosure expenses, which of the following remedies is available to the mortgagee? A judgment by default The mortgagee may be able to obtain a deficiency judgment against the mortgagor Damages The mortgagee must absorb the loss

The mortgagee may be able to obtain a deficiency judgment against the mortgagor

If the amount received at a sheriff's sale of a delinquent mortgage exceeds the amount of debt, who gets the excess? The county The mortgagee The purchaser The mortgagor

The mortgagor

*Which party to a trust deed holds the promissory note until the loan is paid in full? Mortgagor Trustor Beneficiary Trustee

Trustee Mortgagor Beneficiary

What kind of mortgage or loan allows the interest rate to be increased or decreased from time to time? Escalation rate loan Variable rate loan Open mortgage loan Fluctuating rate loan

Variable rate loan

When does the buyer take title when property is financed under a land sale contract? When the land sale contract is paid in full. On whatever date is stated in the agreement for purchase and sale. On closing. When 50% of the mortgage has been paid.

When the land sale contract is paid in full.

Fernando has an existing VA loan against his primary residence and wants to sell to Susan, another veteran. Susan agrees to assume Fernando's loan and will substitute her entitlement for Fernando's. If Fernando sells to Susan, is he eligible for another VA loan for his next owner-occupied home? No, because Frenando is only entitled to one VA loan during his lifetime. No, because the VA does not allow for substitution of entitlement. Yes, because Susan is an eligible veteran and agrees to substitute her entitlement for Fernando's, and Fernando's loan is current. No, because a VA loan can never be assumed.

Yes, because Susan is an eligible veteran and agrees to substitute her entitlement for Fernando's, and Fernando's loan is current.

The type of mortgage that covers more than one parcel of real property is called: a blanket mortgage. a package mortgage. a wraparound mortgage. an all-inclusive mortgage.

a blanket mortgage.

The instrument of record to show that a mortgage has been paid in full is called: a deed release statement. a satisfaction of mortgage. a retirement of mortgage. an estoppel certificate.

a deed release statement.

A third party who accepts a promissory note without having knowledge of any defects is the endorser the payee the maker a holder in due course

a holder in due course

Commercial banks are a primary supplier of residential mortgage loans. a major player in the secondary lending market. more interested in house portfolio loans. a provider of long term capital for local, state and federal government activities.

a major player in the secondary lending market.

Credit unions can be involved in the secondary market. not involved in making loans of any type. a major source of secondary financing. a large source of first mortgage loans.

a major source of secondary financing.

The secondary mortgage market refers to a type of second chance market for borrowers with a poor credit rating. a market where conforming primary loans are bought and sold. a market for borrowers to secure second or junior loans. the market that offers non-conforming conventional financing

a market where conforming primary loans are bought and sold.

The clause that allows a lender to call the entire unpaid balance of a loan due upon default is known as: a cancellation clause. an acceleration clause. an escalation clause. a balloon payment clause.

an acceleration clause.

A promissory note used in connection with a mortgage or trust deed that requires the making of periodic payments to principal is called: an installment note. a non-recourse note. a straight note. a note with call feature.

an installment note.

A note is being signed by co-borrowers. To afford maximum protection to the lender, the note should state that the borrowers are obligated: jointly. both jointly and severally. severally. neither jointly nor severally.

both jointly and severally.

The Federal National Mortgage Association (Fannie Mae) functions in the secondary mortgage market to decrease the liquidity of lending. buy mortgages already made by the originating/primary lender. exclusively purchase and service federally guaranteed loans. buy government-guaranteed debentures at market interest rates.

buy mortgages already made by the originating/primary lender.

The Federal Housing Administration (FHA) makes loans directly to qualified buyers. buys mortgages from private lenders in the secondary market. insures loans made by private lenders. guarantees loans made by private lenders.

buys mortgages from private lenders in the secondary market.

You are a mortgage banker so you do not lend funds other than on single-family residential property. sell loans in the secondary mortgage market. have consumer savings deposits. collect the payments on loans the mortgage banker is holding.

collect the payments on loans the mortgage banker is holding.

*The economy tends to heat up when interest rates are lowered. the government stops spending money. the Federal Reserve raises the overnight lending rate to preferred members. interest rates are raised.

interest rates are lowered

A trust deed: is a conveyance of real property. must be recorded to be valid. is a transfer of legal title. is a voluntary lien.

is a voluntary lien.

The mortgagee sues the mortgagor to obtain a judgment and court order to sell the property. This is known as: strict foreclosure. voluntary foreclosure. nonjudicial foreclosure. judicial foreclosure.

judicial foreclosure.

Craig bought a parcel of real property and obtained a 75% first loan. Lee, the seller, took back a mortgage for a portion of the remainder of the purchase price. This additional encumbrance is called a: chattel mortgage. package money mortgage. junior mortgage. wraparound mortgage.

junior mortgage.

The borrower who gives a real estate interest to a mortgagee or lender in exchange for a loan is called the trustee. trustor. optionee. mortgagor

mortgagor

Under a mortgage, the borrower is also known as the mortgagor. mortgagee.

mortgagor

A provision that prohibits a borrower from paying a loan in full for a prescribed period of time without incurring additional charges is known as the: lock-out clause. acceleration clause. prepayment penalty clause. non-alienation clause.

prepayment penalty clause.

A savings and loan association would not be likely to make a loan to purchase a 225 unit apartment building. a home improvement loan. build a single family home. refinance a residential purchase.

purchase a 225 unit apartment building.

An eligible veteran may obtain a loan from the Oregon Department of Veterans' Affairs to acquire a farm land that won't be used as a farm. purchase a personal residence. refinance an existing loan. acquire a single-family rental property.

purchase a personal residence.

Seller financing under a mortgage is referred to as a: conventional mortgage. home mortgage. purchase money mortgage. chattel mortgage.

purchase money mortgage.

A subordination clause in a mortgage or trust deed: prohibits the grantor from obtaining another loan before the original loan is paid in full. puts the loan in an inferior position in regard to other liens and encumbrances against the property. allows readjustment and alteration of the terms as stated in the trust deed. permits the obligation to be paid off prior to the end of the anticipated term.

puts the loan in an inferior position in regard to other liens and encumbrances against the property.

The lien created by a trust deed is released by the recording of a: reversion trust. acknowledgement of satisfaction. reconveyance deed. satisfaction deed.

reconveyance deed.

The Truth in Lending Act allows a borrower to rescind a loan agreement for a certain number of days following certain events if the loan is to acquire an investment property. purchase a personal residence. acquire a 4-plex. refinance a personal residence with a new lender.

refinance a personal residence with a new lender.

*The Truth in Lending Act applies to residential loans whether made to corporations or individuals. commercial and residential real estate loan transactions. personal property and real property loan transactions. residential real estate loans made to natural persons.

residential real estate loans made to natural persons.

A defeasance clause in a mortgage: indicates that the borrower has the authority to pledge the collateral. requires that the borrower maintain the collateral and not commit waste. stipulates that the borrower will be able to regain clear title after the mortgage is paid in full. requires that the balance be paid in full upon default of the loan.

stipulates that the borrower will be able to regain clear title after the mortgage is paid in full.