Unit 5 Quiz Ch.15, 16, and 24

If a buyer of an $185,000 home obtains a $150,000 mortgage with 4 points, how much will the lender charge for the points at closing? (a) $6,000 (b) $3,400 (c) $2,000 (d) $40,000

(a) $6,000

A developer had a mortgage loan on his entire housing development. When he sold a lot to a buyer, he was able to deliver title to that lot free of the mortgage lien by obtaining a partial release. What type of loan did the developer have? (a) Blanket mortgage (b) Purchase money mortgage (c) Package mortgage (d) Open-end mortgage

(a) Blanket mortgage

A "friendly foreclosure" enables a mortgagor to prevent the mortgagee from taking the property by statutory means. This can be accomplished by (a) a deed in lieu of foreclosure. (b) a reconveyance deed. (c) an assumption. (d) an escrow deed.

(a) a deed in lieu of foreclosure.

The clause in a mortgage instrument that would prevent the assumption of the mortgage by a new purchaser is a (a) due-on-sale clause. (b) power of sale clause. (c) defeasance clause. (d) certificate of sale clause.

(a) due-on-sale clause.

A mortgagor is the one who (a) gives the mortgage. (b) holds the mortgage. (c) provides the mortgage funds. (d) forecloses on the mortgage.

(a) gives the mortgage.

A lender may protect its interest in a mortgage loan by obtaining additional security from (a) private mortgage insurance. (b) title insurance. (c) the borrower's note. (d) impound accounts.

(a) private mortgage insurance.

The purpose of a mortgage is to (a) provide security for the loan. (b) convey title of the property to the lender. (c) restrict the borrower's use of the property. (d) give title to a third party.

(a) provide security for the loan.

If the amount realized at a sheriff's sale as part of a mortgage foreclosure is more than the amount of the indebtedness and expenses, then the excess belongs to (a) the mortgagor. (b) the mortgagee. (c) the sheriff's office. (d) the county.

(a) the mortgagor.

A seventy-year-old homeowner has owned her house for over 50 years. It has fallen into disrepair but, because she lives on a fixed income, she does not have the money to make the needed repairs. She has a considerable amount of equity in the house. What type of loan would probably best suit her needs? (a) A home equity loan (b) A reverse mortgage (c) A blanket loan (d) An open-ended loan

(b) A reverse mortgage

A mortgage broker generally offers which of the following services? (a) Handling the escrow procedures (b) Bringing the borrower and the lender together (c) Working to arragne a home inspection (d) Granting real estate loans using their own funds

(b) Bringing the borrower and the lender together

How is Fannie Mae involved with FHA loans? (a) Fannie Mae initiates FHA loans (b) Fannie Mae buys FHA loans (c) Fannie Mae services FHA loans (d) Fannie Mae insures FHA loans

(b) Fannie Mae buys FHA loans

For purposes of mortgage foreclosures, Illinois is classified as what type of state? (a) Strict foreclosure (b) Judicial foreclosure (c) Nonjudicial foreclosure (d) Redemptive nonforeclosure

(b) Judicial foreclosure

If a property sold as a mortgage foreclosure does not sell for an amount sufficient to satisfy the outstanding mortgage debt, the mortgagor may be responsible for (a) a default judgment. (b) a deficiency judgment. (c) liquidated damages. (d) punitive damages.

(b) a deficiency judgment.

The seller agrees to sell the house to the buyer for $200,000. The buyer was unable to qualify for a mortgage loan for this amount so the seller and buyer enter into a contract for deed. The interest the buyer has in the property under a contract for deed is (a) legal title. (b) equitable title. (c) joint title. (d) mortgagee in possession.

(b) equitable title

The amount of a loan expressed as a percentage of the value of the real estate offered as collateral is the (a) amortization ratio. (b) loan-to-value ratio. (c) debt-to-equity ratio. (d) capital-use ratio.

(b) loan-to-value ratio.

Under the lien theory, the equitable title to the property is held by the (a) mortgagee. (b) mortgagor. (c) trustor. (d) trustee.

(b) mortgagor

The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the (a) wraparound mortgage. (b) open-end mortgage. (c) growing-equity mortgage. (d) graduated-payment mortgage.

(b) open-end mortgage

The type of mortgage loan that uses both real and personal property as security is a (a) blanket mortgage. (b) package mortgage. (c) purchase money mortgage. (d) wraparound mortgage.

(b) package mortgage.

An extension of credit from a seller to a buyer to allow the buyer to complete the transaction is called a (a) growing equity mortgage. (b) purchase money mortgage. (c) package mortgage. (d) blanket mortgage.

(b) purchase money mortgage.

Fannie Mae and Ginnie Mae have the common purpose of (a) originating residential mortgage loans. (b) purchasing existing mortgage loans. (c) insuring residential mortgage loans. (d) guaranteeing existing mortgage loans.

(b) purchasing existing mortgage loans.

Charging more interest than is legally allowed is called (a) escheat. (b) usury. (c) a deficiency. (d) an estoppel.

(b) usury

A borrower and seller have agreed to split the discount points. The sale price of the property was $125,000 and the borrower secured a 75 percent loan. If the lender charged four points and a one percent origination fee, how much did the borrower and the seller each pay? (a) $5,000 (b) $3,750 (c) $1,875 (d) $1,785

(c) $1,875

A borrower obtained a $7,000 second mortgage loan for five years at 6 percent interest per annum. Monthly payments were $50. The final payment included the remaining outstanding principal balance. What type of loan is this? (a) A fully amortized loan (b) A straight loan (c) A partially amortized loan (d) An accelerated loan

(c) A partially amortized loan

An FHA-insured mortgage loan would MOST LIKELY be obtained from which of the following? (a) The Federal Housing Administration (b) The Department of Housing and Urban Development (c) Any qualified lending institution (d) Any qualified insuring institution

(c) Any qualified lending institution

Which would NOT be associated with a VA loan? (a) Certificate of eligibility (b) Certificate of reasonable value (c) One percent prepayment penalty (d) PMI

(c) One percent prepayment penalty

The grantor becomes the lessee and the grantee becomes the lessor under which financing arrangement? (a) Partial sale (b) Wraparound mortgage (c) Sale and leaseback (d) Assumption of mortgage

(c) Sale and leaseback

The finance fee charged by the lender to make the loan is (a) a prepayment penalty. (b) an advance interest payment. (c) a loan origination fee. (d) a prepayment of mortgage insurance.

(c) a loan origination fee.

The maximum amount for payments in an adjustable-rate mortgage is set by the (a) ceiling. (b) term. (c) cap. (d) factor.

(c) cap

An articles of agreement for deed (land contract) provides for the (a) sale of unimproved land only. (b) sale of real property under an option agreement. (c) conveyance of legal title at a future date. (d) immediate transfer of reversionary rights.

(c) conveyance of legal title at a future date.

The pledging of property as security for payment of a loan is called (a) disintermediation. (b) equity. (c) hypothecation. (d) subordination.

(c) hypothecation

When real estate is sold under an installment land contract and the buyer takes possession of the property, the legal title (a) is subject to a purchase money mortgage. (b) must be transferred to a land trust. (c) is kept by the seller until the purchase price is paid according to the contract. (d) is transferred to the buyer according to the contract.

(c) is kept by the seller until the purchase price is paid according to the contract.

A promissory note (a) may not be executed in connection with a real estate loan. (b) is an agreement to perform or not to perform certain acts. (c) is the primary evidence of a debt. (d) is a guarantee by a government agency.

(c) is the primary evidence of a debt.

In a graduated payment loan (a) mortgage payments decrease. (b) mortgage payments balloon in 5 years. (c) mortgage payments increase. (d) the interest rate on the loan adjusts annually.

(c) mortgage payments increase.

Mortgage lenders want assurance that future real estate taxes will be paid. The most common way to do this is to require the borrower to (a) obtain title insurance. (b) sign a note. (c) pay into an impound (escrow) account. (d) submit paid tax receipts.

(c) pay into an impound (escrow) account.

A person who assumes an existing mortgage loan is (a) not personally liable for the repayment of the debt. (b) not in danger of losing the property by default. (c) personally responsible for paying the principal balance. (d) generally released from liability, but not always.

(c) personally responsible for paying the principal balance.

An existing mortgage loan can have its lien priority lowered through the use of a (a) hypothecation agreement. (b) satisfaction of mortgage. (c) subordination agreement. (d) reconveyance of mortgage.

(c) subordination agreement.

From which of the following would a borrower most likely obtain a residential real estate mortgage loan? (a) An insurance company (b) A pension fund (c) An endowment fund (d) A mortgage broker or a mortgage banker

(d) A mortgage broker or a mortgage banker

The clause in a deed of trust or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default is what clause? (a) Judgment (b) Escalator (c) Forfeiture (d) Acceleration

(d) Acceleration

What is the clause in a note, mortgage or trust deed that permits a lender to declare the entire unpaid sum due should the borrower default? (a) Judgment clause (b) Escalator clause (c) Forfeiture clause (d) Acceleration clause

(d) Acceleration clause

Which of the following, standing alone, would not trigger additional advertising rules by the Truth in Lending Act? (a) $499 per month (b) $1,000 down (c) 8 percent interest rate (d) Assumable mortgages

(d) Assumable mortgages

Illinois is most accurately referred to as what type of mortgage theory state? (a) Title (b) Lien (c) Trust (d) Intermediate

(d) Intermediate

If a borrower defaults and the court simply awards the lender full legal title, what kind of foreclosure has taken place? (a) Judicial (b) Nonjudicial (c) Simple (d) Strict

(d) Strict

Which of the following is true about a term mortgage? (a) All interest is paid at the end of the term. (b) The term is limited by state statute. (c) The debt is partially amortized over the term. (d) The entire principal is due at the end of the term.

(d) The entire principal is due at the end of the term.

What is the Illinois statutory usury ceiling for real estate financing? (a) 20 percent (b) 35 percent (c) 3 percent over prime (d) There is no ceiling

(d) There is no ceiling

When a mortgage loan has been paid in full, it is important for borrowers to be sure that (a) the paid note is placed in a safe deposit box. (b) they obtain a deed of partial reconveyance. (c) the paid mortgage is returned to the lender. (d) a satisfaction of mortgage is recorded.

(d) a satisfaction of mortgage is recorded.

A real estate loan payable in periodic installments that are sufficient to pay the principal in full during the term of the loan is called a(n) (a) a conventional loan. (b) a straight loan. (c) a participation loan. (d) an amortized loan.

(d) an amortized loan.

In a sale-and-leaseback arrangement the (a) seller retains legal title to the real estate. (b) buyer becomes the lessee. (c) broker will not earn a commission. (d) buyer becomes the lessor.

(d) buyer becomes the lessor.

The interest in a property held by the owner in excess of any liens against it is called (a) hypothecation. (b) subordination. (c) leverage. (d) equity.

(d) equity

A borrower has secured an FHA insured loan. This means that the FHA will insure which of the following against a possible loss? (a) Buyer (b) Seller (c) Lender (d) Broker

c) Lender

Which of the following statements is TRUE? (a) The priority of a mortgage is determined by the date on which it was executed. (b) A mortgage document contains no covenants or promises on the part of the borrower. (c) A deed of trust is typically conveyed by the trustor to the beneficiary. (d) A buyer does not have to be a veteran to assume a VA loan.

d) A buyer does not have to be a veteran to assume a VA loan.