Real Estate Principles Unit 8
A mortgage broker arranges a 3-year, $15,000 second loan secured by a deed of trust. The maximum commission that may be charged is
15%
A loan where lower monthly payments rise gradually over five to ten years, then level off for remainder of term is called a
A Graduated Payment Mortgage (GPM) is a mortgage in which the monthly payment for principal and interest graduates by a certain percentage each year for a specific number of years and then levels off for the remaining term of the mortgage. You are viewing Unit Eight: Section 15 of 27:
A deficiency judgment against a mortgagor is possible
A deficiency judgment is a judgment against a borrower for the balance of a debt owed when the security for a loan is insufficient to satisfy the debt. A deficiency occurs when the foreclosure sale of a property produces less than the amount due on the loan. In California, a mortgagee cannot recover a deficiency judgment on a purchase-money loan. In those states where mortgages generally carry a "power of sale," creditors must bring a separate action to obtain a deficiency judgment.
A holder in due course is someone who takes a negotiable instrument
A holder in due course is someone who takes a negotiable instrument (check, note) for value, in good faith, and without notice of any defense against its enforcement that might be made by any person.
When comparing mortgage bankers and mortgage brokers, which of the following is true?
A mortgage banker is a person, corporation or firm that normally provides its own funds for mortgage financing. A mortgage broker is a person or firm that acts as an intermediary between borrower and lender who negotiates, sells or arranges loans and sometimes continues to service the loans (also called a loan broker).
A broker negotiated a loan for a buyer. He will need to prepare a
A person who acts as a Mortgage Loan Broker and negotiates a loan for which a license is required, and for compensation, which is secured directly or collaterally by a lien on real property, regardless of the size of the loan, must deliver a written disclosure statement to the borrower. The statement must be delivered within three business days of receipt of the borrower's written loan application, or before the borrower becomes obligated to the loan, whichever is earlier. This is true whether the loan is being processed manually or electronically.
The clause in a mortgage note which permits the lender to declare the unpaid balance due and payable upon default by the borrower is called a(n)
An acceleration clause is a provision in a mortgage, trust deed, promissory note or land contract that, upon the occurrence of a specified event, gives the lender the right to call all sums due and payable in advance of the fixed payment term.
In addition to prohibiting discriminatory language in real property instruments, the Unruh Act also
California's Unruh Civil Rights Act covers contracts for goods and services. If a mortgage with a power-of-sale clause or deed of trust on a single-family owner-occupied residence stems from a contract that falls with the Unruh Act, even more explicit notice must be given to a trustor or mortgagor in default.
The federal agency that insures savings accounts is the
FDIC
Which of the following is a commonly used method of analyzing a borrower
FICO score
Which of the following is exempt from usury laws in California?
In 1979, California voters passed Proposition 2, which exempted from usury laws any loan made or arranged by a real estate broker and secured by real property. California law also exempts loans made by banks and savings and loan associations.
Which of the following contributed to the current subprime lending crisis?
Many loans required little or no down payment, and borrowers were able to take advantage of no-doc loans in which the borrower's "stated income" was not verified. So-called subprime borrowers (based on their credit histories) who would formerly have been denied a loan, or offered a loan only at a high interest rate, found ready sources of funds. Low "teaser" interest rates attracted borrowers who failed to notice, or understand, the likely future jump in payment amounts when the initial rate period ended.
Mortgage loan broker Mary Miller arranges a $20,000 loan secured by a second deed of trust for a homeowner who wants extra cash to pay off some credit cards. The loan term is 15 years. Mary's commission is 10% of the loan amount, and loan expenses include an appraisal fee of $350, a credit report of $40, and notary fees of $50. What is the total maximum fee that Mary can charge on this loan, including brokerage commission and expenses?
Mary's commission is: $20,000 × 10% = $2,000 Expenses are: $350 + $40 + $50 = $440 Both Mary's commission and the expenses come within the limitations of the Real Property Loan Law. The total maximum fee thus is $2,000 + $440, or $2,440.
Which of the following would NOT be illustrative of an institutional lender?
Mortgage company Institutional lenders are those lenders who lend their own money. A mortgage company usually does not lend its own money, but rather acts in most cases as the representative of an institutional lender. They are sometimes referred to as "loan correspondents" or "loan brokerage firms."
When must the settlement agent provide the seller its copy of the Closing Disclosure?
No later than the day of consummation
Which of following is a benefit of real estate ownership?
Often the greatest financial benefit of real estate ownership is that it can be used as security for a loan. By borrowing money against the value of the property, home purchasers benefit from present use, future appreciation (increase in value), and forced saving by paying down the amount owed.
RESPA regulates loans for which of the following?
One-to-four-unit family dwellings
Some lending activities are conducted under the rules of the California Residential Mortgage Lending Act. Which of the following are exempt under this Act?
Real estate brokers licensed in CaliforniaInstitutional and noninstitutional lenders already licensed by the state or federal government, such as banks, savings and loan associations, trust companies, and insurance companies:An individual or company making residential mortgage loans with his, her, or its own moneyGovernment and pension plan employeesCourt-appointed estate or other representativesA trustee under a deed of trustThe law also exempts a California finance lender licensed under the California Finance Lenders Law. A finance lender is someone who is in the business of making consumer loans or commercial loans in which personal property may be used as collateral.
A request for notice of default would be of most help to the
Since foreclosure wipes out all junior liens, the holder of a junior lien should request the recording of a request for notice of default announcing that a default has occurred.
The purpose of an impound account is to
The lender may require that an impound account be established for the benefit of the borrower, to accumulate reserves for future recurring costs, such as property taxes and hazard insurance.
Loan charges usually include not only the interest rate but also a loan origination fee, points, and other costs. Make a survey of loan charges by at least three online lenders who make loans in California. Base your comparisons on both a fixed-rate and an adjustable-rate loan of $320,000, representing 80% of the value of a home selling for $400,000, with a down payment of 20%. As a further comparison, use loan terms of both 15 and 30 years. You can begin your survey by entering the search term "home loan" in one of the internet search engines, such as Google or Yahoo. You could also check out some of the online property listing services, such as www.realtor.com, www.homegain.com, www.realestate.com, and www.zillow.com.
You generally will find that interest rates on fixed-rate loans are higher than those initially set on adjustable-rate loans and that a longer loan term will have a higher interest rate than a shorter loan term.
A provision that gives the lender the right to demand full payment of a mortgage upon sale of the property is
a due-on-sale clause
An instrument by which property is hypothecated to secure the payment of debt or obligation is known as
a mortgage
The repayment of a loan in equal installments that includes both interest and principal reduction is referred to as
an amortized loan
Which of the following types of lenders makes the greatest number of different types of loans?
commercial banks.
the security instrument of choice in California is the
deed of trust
An agreement to sell a homeowner's equity in the home describes a
home equity mortgage. It is regulated by the California Civil Code, which requires specific notice, including right of cancellation, to the homeowner.
To pledge a thing as security for an obligation without surrendering possession of it refers to
hypothecation
When the Federal Reserve Board wants to tighten the money supply, it would
in a tight money market where the supply of money is limited and the demand for money is high, interest rates typically go up.
The cost of using money BEST describes
interest
Identify the security instrument described in each of the following situations: Harvey and Helen Headstrong have purchased Whiteacre. If they default on their loan payments, they can have the loan reinstated or redeem their property if it is sold at the lender's request.
mortgage
Which of the following is NOT an institutional lender
mortgage company
Identify the security instrument described in each of the following situations: Bernice Bosh has purchased Blackacre. She holds title to Blackacre. If she defaults on her loan payments and Blackacre is sold at the lender's request, she cannot redeem it.
mortgage with power of sale
California's Covered Loan Law applies to loans that do not exceed the maximum conforming limit established by Fannie Mae for
owner-occupied one-to four-unit properties.
Real estate loans generally include a promissory note and a
security instrument
The instrument used to secure a loan on personal property is called a
security instrument.
When borrowing money to purchase real estate, the "cost of credit" refers to
the rate of interest charged to the purchaser.
Identify the security instrument described in each of the following situations: Alan Adema bought Redacre. He defaulted in his loan payments and received notice that Redacre would be sold. The day before the sale, Alan offered to pay the overdue installments and costs but was surprised when the lender demanded that the entire loan balance be paid to stop the sale.
trust deed
Identify the security instrument described in each of the following situations: Mel and Millie Mendez have purchased Greenacre and are living there, even though they have conveyed title to someone else.
trust deed
Money is a medium of exchange as well as a measure of
value