Chapter 17 Back of the Book Test - Real Estate Finance
A lender is charging 3 points on a $50,000 loan. The borrower must therefore pay the lender an advance amount of
$1,500
A builder is required to secure a loan with mortgages on three properties. This is an example of
A blanket mortgage loan
Points
A discount point is one percent of the loan amount. The lender charges this pre-paid interest at closing.
Mortgage
A legal document wherein a mortgagor pledges ownership interests in a property to a lender, or mortgagee, as collateral against performance of the mortgage debt obligation.
Title Theory
A state whose laws give legal title of a mortgaged property to the mortgagee until the mortgagor satisfies the terms and obligations of the loan.
Note
An agreement to repay a loan of an indicated amount under certain terms.
The Federal Reserve System regulates the money supply in which way
Buying securities, changing the discount rate and controlling bank reserves.
Lien Theory
a state whose laws give a lender on a mortgaged property equitable title rather than legal title.
The difference between a balloon loan and an amortized loan is
an amortized loan is paid off over the loan period.
In addition to income, credit and employment data, a mortgage lender requires additional documentation, usually including
an appraisal report
Deed of Trust
an instrument used by the borrower to convey title to a mortgaged property to a trustee to be held as security for the lender, who is the beneficiary of the trust.
Mortgagor
borrower
The Equal Credit Opportunity Act (ECOA) requires lenders to
consider the income of a spouse in evaluating a family's creditworthiness.
One primary purpose for the secondary mortgage market is to
cycle funds back to primary lenders so they can make more loans.
A borrowers debt ratio is derived by
dividing one's debts by one's gross income
The primary role of the Federal Housing Authority in the mortgage lending market is to
insure loans that are made by approved lenders.
Interest Rate
is a percentage applied to the principal to determine the amount of interest due.
A distinctive Feature of a Promissory Note is
it is a negotiable instrument.
Mortgagee
lender
When the terms of the mortgage loan are satisfied, the mortgagee
may be required to execute a release of mortgage document
The principal role of FNMA is to
purchase FHA and VA backed loans
The principal role of the Veteran's Administration in the mortgage lending market is to
purchase FHA and VA backed loans
The purpose of an income ratio in qualifying a borrower is to
safeguard against over indebtedness.
A lenders commitment to lend funds to a borrower in order to retire another outstanding loan is called a
take out loan commitment
The three overriding considerations of a lender's mortgage loan decision are
the ability to repay, the value of the collateral and the profitability of the loan.
A buydown is a financing arrangement where
the borrower pays additional interests at the onset in order to obtain a lower interest rate.
The key feature of an adjustable mortgage loan is that
the interest rate may vary.
The loan to value ratio is an important underwriting criterion, for the primary reason that
the lender wants to ensure the loan is fully collateralized.
A closing of a mortgage loan
the parties complete all loan origination documents and the loan is funded
Hypothecation
the process of securing a loan by pledging a property without giving up ownership of the property.
One feature of a wraparound mortgage loan is that
the seller offering the buyer a wraparound can profit from a difference in interest rates.
The major players in the secondary mortgage market are
Fannie Mae, Freddie Mac and Ginnie Mae.
Mortgage Financing
Financing that uses mortgaged real property as security for borrowed funds.
A Homeowner borrows money from a lender and gives the lender a mortgage on the property as collateral for the loan. The homeowner retains title to the property. This is an example of
Hypothecation
Term
Is the period of time over which the loan must be repaid.
Which of the following is true of a loan with negative amortization?
Payments are not sufficient to retire the loan.
Which laws or regulations prevent mortgage lenders from discriminating in extending credit to potential borrowers based on race, color, religion, national origin, sex, marital status, age and dependency on public assistance.
The Equal Credit Opportunity Act
Which laws or regulations require mortgage lenders to provide an estimate of closing costs to a borrower and forbid them to pay kickbacks for referrals?
The Real Estate Settlement Procedures Act.
Which of the following best expresses the mechanics of a mortgage loan transaction?
The borrower gives the lender a note and a mortgage in exchange for loan funds
principal
The capital amount borrowed, on which interest payments are calculated.
Interest
The charge for the use of the lender's money.
A graduated payment loan is a mortgage loan where
The loan payments gradually increase.
Payment
The loan term, loan amount, and interests combine to determine the periodic payment amount.
Loan Balance
The remaining unpaid principal of a mortgage loan.
In a Deed of Trust transaction, which of the following occurs?
The trustor conveys title to a trustee in exchange for loan funds from the beneficiary.
A lender lends money to a homeowner and takes legal title to the property as collateral during the payoff period. They are in a
Title Theory State
Which laws or regulations require mortgage lenders to disclose financing costs and annual percentage rate to a borrower before funding a loan?
Truth in Lending Laws.
A lender who charges a rate of interest in excess of legal limits is guilty of
USURY (excessive interest) illegal