12 LAW AND PRACTICE- EXAM
9975 $48,500 X .65 (amount of loan) = $31,525.00. $48,500 - $31,525.00 (amount of loan) = $16,975 - $7,000.00 (earnest money) = $9,975.00
A buyer paid $7,000 in earnest money and acquired a mortgage of 65% of the $48,500 sales price. How much cash did the buyer have to bring to closing? 9975 16975 24525 41500
alienation clause Explanation The alienation clause is closely associated in meaning with Due-On-Sale Clause and Acceleration Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the property owner transfers ownership, title or interest without the lender's consent.
A clause in a deed or trust, mortgage or promissory note which permits the lender to call the outstanding balance due and payable should the property be sold by the borrower is a(n): acceleration clause balloon payment clause exculpatory clause alienation clause
Through the Public Trustee by a special administrative procedure The Public Trustee initiates the foreclosure process.
A deed of trust in Colorado is foreclosed: A public auction by the county treasurer A public auction by the sheriff Through the Public Trustee by a special administrative procedure Through the courts like a mortgage
3003 ($150,000 x 70 % x .0286) = $3003
A home was appraised for tax purposes at 70 percent of its $150,000 purchase price. The mill rate is 28.6. What are the annual taxes? 2889 4290 3003 3182
when the deed of reconveyance is recorded when ownership and encumbrance title work is ordered A deed or reconveyance is a document issued by a mortgage holder indicating that the borrower is released from the mortgage debt and transfers the property title from the lender, also called the beneficiary, to the borrower, also called the trustor.
A recorded deed of trust is removed from the county records: by recording a new deed of trust when final payment is made by the trustor when the deed of reconveyance is recorded when ownership and encumbrance title work is ordered
Allows portions of the property, given as security, to be released from the mortgage lien upon performance of a specified act Explanation When a blanket mortgage is used to secure a debt, there is usually a provision in the mortgage which provides for the "release" of part of the property held as security.
A release clause in a mortgage: Provides for an option to extend its due date Releases a guarantor from further liability under specified conditions When part of a document creates a lien second only to the lien of taxes and assessments Allows portions of the property, given as security, to be released from the mortgage lien upon performance of a specified act
defeasance clause Explanation The defeasance clause states that, when paid in full, a mortgage or deed of trust lien will be canceled.
A statement in a mortgage or trust deed to the effect that when a debt has been paid the lien will be canceled is a(n): defeasance clause alienation clause liquidation provision habendum clause
a subordination agreement Subordination is the process of allowing another lien to take priority in the event of foreclosure.
An existing mortgage loan may be changed to a junior lien by: court order satisfaction of the first mortgage loan a subordination agreement exchanging before the first mortgage was recorded
has been agreed to by the buyer in the contract While many lenders charge a 1% loan origination fee, it is negotiated between the lender and the buyer and referenced in the contract.
At time of closing, a lender is allowed to collect a loan origination fee that: does not exceed 1% does not exceed the usury rate has been agreed to by the buyer in the contract does not exceed 2%
Trustor (borrower) holds title to the property during the term of the mortgage Explanation Trustor (AKA buyer or borrower) has title to the property. The loan is secured by a lien created through a Trust Deed and held by the Public Trustee. As the lender benefits from this lien, the lender is referred to as the "beneficiary".
Colorado is a lien theory state. In a lien theory state the: Trustor (borrower) holds title to the property during the term of the mortgage Mortgagor may foreclose only by court action Mortgagee takes title to the property during the term of the mortgage
Deed of Trusts are liens and do not give the lender title to the property Lien Theory secures the loan between the the buyer and the lender. In a lien theory state the lender does not get title they just get a lien established by a Deed of Trust. All liens on a property must be cleared prior to sale, this means the lender knows they will get paid if the property is ever sold. The seller is paid and out of the picture, that we are a lien theory state has nothing to do with them. In a lien theory state the lien is enforced by the Public Trustee and not the courts.
Colorado is a lien theory state. This means: seller is released from obligation by the lender liens recorded against a property are normally foreclosed through the courts Deed of Trusts are liens and do not give the lender title to the property all of the above
Sue for a deficiency judgment Explanation Suit can be brought for the deficiency from what was owed to what was received by the lender, it is a deficiency judgment.
Davis defaulted on his mortgage and the lender began foreclosure proceedings. At the foreclosure sale Davis's house was sold for $115,000 while the unpaid balance of the loan was $121,000. What can the lender do about the $6,000 difference? Sue for specific performance Sue for injunctive relief Sue for monetary damages Sue for a deficiency judgment
To reduce the interest rate A discount point is one percent of the loan amount and is used to buy down the interest rate. Each discount point paid reduces the interest rate by 1/8 of one percent.
Discount points are charged by the lender to: To reduce the price of the property To reduce the down payment To reduce the interest rate To reduce the closing costs
On the same date - Jan 1st of the current year Explanation Since taxes are paid in arrears the lien attaches at that time and it does not have to be recorded.
In Colorado, a property subject to general ad valorem taxes is assessed on the first day of January of the current year, and the lien against the property for the taxes attaches: On the same date - Jan 1st of the current year The following January 1st The following February 28th The following April 30th
see that buyers and sellers know all settlement costs The purpose of RESPA is to eliminate kickbacks and provide full disclosure of closing costs to buyer and seller.
One purpose of RESPA (Real Estate Settlement Procedures Act) is to: see that buyers do not borrow more than they can repay make real estate brokers more responsible to buyer's needs help buyers know how much money is required see that buyers and sellers know all settlement costs
All of the above Use of TILA-RESPA Integrated Diclosure (TRID) Limits escrow reserves a lender can require Prohibits kickbacks These are some of the key elements of RESPA. 'Real Estate Settlement Procedures Act - RESPA' was designed to protect potential homeowners and enable them to become more intelligent consumers. RESPA requires that lenders provide greater amounts of information to prospective borrowers at certain points in the loan settlement process.
RESPA covers which of the following? Use of TILA-RESPA Integrated Diclosure (TRID) Limits escrow reserves a lender can require Prohibits kickbacks All of the above
a trust deed may be foreclosed without court intervention By not having to go through the courts to foreclose, a trust deed provides a faster and less expensive foreclosure process. In Colorado, to avoid having to use the courts, the Public Trustee must be named trustee in the Deed of Trust.
Regarding trust deeds and mortgages: a trust deed must be foreclosed without court intervention a mortgage is never foreclosed through court intervention a trust deed may be foreclosed without court intervention a mortgage may be foreclosed without court intervention
291.66 Explanation $250,000 X .35 = $87,500 Assessed Value X .04 Mill Rate = $3500 / 12 = $291.66 monthly taxes
The assessed value is 35% of a property valued at $250,000. The mill rate is 40. What are the monthly taxes on the property? 3500 933.32 4721.28 291.66
acceleration clause The acceleration clause allows the lender to move up the date when the entire sum is due.
The clause in a mortgage that can be enforced to make the entire debt due immediately if the mortgagor defaults on the loan is the: alienation clause acceleration clause due-on-sale clause a satisfaction
cancels the mortgage when the loan is repaid Explanation The defeasance clause in a mortgage cancels the mortgage when the loan is repaid.
The defeasance clause in a mortgage: prevents the loan from being assumed prevents the loan from being sold allow for interest rate changes to be made cancels the mortgage when the loan is repaid
home equity A home equity loan has a three-day right of rescission.
The rescission provisions of truth-in-lending apply to what type of loan? purchase money construction business home equity
signs the note The trustor is the borrower under a deed of trust.
The trustor in connection with a trust deed is the party who: lends the money receives the payments signs the note holds the deed of trust
signs the note and gives the mortgage Buyers, sellers, real estate brokers, even bankers get confused, sometimes, by the difference between "mortgagor" and "mortgagee". The confusion arises because they're mixed up about who actually does the mortgaging. Most homebuyers say they'll go to a lender "to get a mortgage" and real estate brokers do the same: "We'll find a bank to give you a mortgage". That's all wrong, though. You're the one who will give a mortgage to the bank. A mortgage is a financial claim against your property. You sign a document giving that claim (a lien) to the lender, and in return they give you -- money. You give the lending institution two things: first a note or bond, which is a personal promise to repay the loan, just like any promissory note. Then you also sign another document, a trust deed (in some states, a mortgage), which says "and if I don't pay as promised, you can take the property." It's you who mortgages the property. The lender takes the mortgage and holds it (until the debt is paid off.) So you don't look for a bank to give you a mortgage. You do the giving. You're looking for a bank that will take your mortgage. The person who performs the action is the "or" or "er" actor. Think of "employer" or "donor". That makes the you, the borrower, the "mortgagor". You're doing the mortgaging. The bank, or other lender, takes your mortgage. And the recepient is always the "ee" figure. That makes the bank the "mortgagee". Real estate students remember the difference by noticing that "borrower" has two "o"s in it, and so does "mortgagor." "Lender", on the other hand, has two "e"s, and so does "mortgagee".
Under a mortgage, the mortgagor is the party who: lends the money receives the payments on the note holds the mortgage signs the note and gives the mortgage
Collecting more interest than allowed by law Usury: charging more than the legal rate of interest for the use of money. In Colorado the general maximum rate is 45%. Please remember that figure for the state licensing exam.
Usury is: Collecting more interest than allowed by law Building a structure that is totally on someone else's land Selling property for less than the asking price Building a structure that is partially on someone else's land
trustee Explanation With a Deed of Trust an impartial 3rd party, the Public Trustee, holds "naked title" (title without possession) to the property. The owner of the property who mortgaged the property (a voluntary lien) to secure the loan is called the "Trustor." The lender to whose benefit the lien was placed on the property to secure the loan is called the "Beneficiary."
When using a deed of trust in a real estate loan, title to the property is held by the: seller lender trustor trustee
A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property Explanation An installment land contract can be very risky for the buyer but does allow the buyer to get into a property which they may not qualify for. Can be used to avoid the acceleration clause in a mortgage.
Which of the following best describes an installment land contract? A contract to buy land only A mortgage on land A means of conveying title immediately while the buyer pays for the property A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property
Origination Fee Explanation The others are paid to the ones providing the service.
Which of the following charges increases the lender's yield on a real estate loan: Appraisal Origination Fee Credit report Title Insurance
Release A release clause so that an individual property can be release from the blanket loan which covers several properties. A blanket loan is often used to purchase more than one piece of real estate. They are popular with developers who buy large tracts of land, then subdivide them to create many individual parcels to be sold one at a time as they are developed.
Which of the following clauses is most likely to be included in a blanket loan? Escalation Take-out Release Exculpatory
A promissory note The promissory note is secured by a deed of trust or mortgage.
Which of the following documents accompanies the deed of trust? A deed An abstract of title A contract of sale A promissory note
All of the above The trustee has naked title The lender is named the beneficiary The trustor has legal title Trustee oversees the provisions of the Trust Deed. The lender benefits from any action taken by the Trustee. The trustor is the borrower and has legal title in a lien theory state.
Which of the following is (are) correct concerning the parties of a trust deed? The trustee has naked title The lender is named the beneficiary The trustor has legal title All of the above
A mortgage's priority is determined by the date on which it was executed The key word making A the correct answer was the word "executed." A mortgage is "executed" on the date it is signed by both parties. Yet its priority, should the loan go into default, is determined by the date it was "recorded" at the County Clerk's office. Since nobody does closings at the Clerk's office the recording date is almost always after the date upon which it was signed. Therefore A was the correctanswer as the only statement that was wrong.
Which of the following statements is not correct? A mortgage's priority is determined by the date on which it was executed A mortgage instrument pledges the real estate as security for the loan A deed of trust is usually conveyed by the trustor to the trustee In Colorado a deed of trust and a promissory note are executed at the same time
All of the above are correct Under a trust deed the trustor is the borrower, maker, payor, and the lender is the mortgagee, the beneficiary, the owner, and holder of the note The trustee is a third party such as a public official that holds title in trust The beneficiary is the lender; the trustee is a public official All of the above are correct The trustor is the borrower; the trustee could be a lender, title company, trust company or public trustee. The trustee holds property in trust for another.
Which of these is (are) correct? Under a trust deed the trustor is the borrower, maker, payor, and the lender is the mortgagee, the beneficiary, the owner, and holder of the note The trustee is a third party such as a public official that holds title in trust The beneficiary is the lender; the trustee is a public official All of the above are correct
