RE 350 - Chapter 9, REAL ESTATE CHAPTER 9, Chapter 9, RE CH 9, Chapter 9, Chapter 9 Real Estate
if a default goes into a residential borrower's record it is likely to lower their credit score by at least _____ points
100
Order these choices in terms of severity, from mildest to most severe 1Counseling and financial reorganization 2Deed in lieu of foreclosure 3Reduction or postponement of mortgage payments 4Short sale
1342
a late fee commonly is charged on a home mortgage loan at a rate of 4 to 5 percent of the overdue payment if the payment is delayed for than ____ days after it is due
15
Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between ___ and ___ years
15, 30
Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately
275 basis points
When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected. While borrowers can recover from this reduction in their credit score, if a default goes into the borrower's records it will remain for:
7 years
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)?
90 days
default generally becomes considered substantiative when payments have been missed for ____ days. Then the ultimate response of the lender is likely to be ______
90, foreclosure
The most internationally oriented index rate for adjustable rate mortgages is a. Federal home loan bank cost-of-funds index b. Treasury constant maturity rate c. A LIBOR rate d. A home mortgage loan interest rate index e. The wall street journal prime rate
A LIBOR rate
A partially amortizing loan always will have: a. Caps b. Only one states term c. A balloon payment d. A prepayment penalty e. Recourse
A balloon payment
If a homeowner in mortgage distress owes more than the value of the home, and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT:
A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
Which of the following acts prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program? A) Equal Credit Opportunity Act (ECOA) B) Truth-in-Lending Act (TILA) C) Real Estate Settlement Procedures Act (RESPA) D) Home Ownership and Equity Protection Act (HOEPA)
A) Equal Credit Opportunity Act (ECOA)
Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the A) demand clause. B) insurance clause. C) escrow clause. D) exculpatory clause.
A) demand clause.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as he or she produces the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Georgia, this right only extends to the date of the foreclosure sale. When this occurs, this right is more commonly referred to as A) equity of redemption. B) statutory redemption. C) strategic default. D) substantive default.
A) equity of redemption.
A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the A) mortgage (deed of trust). B) listing contract. C) note. D) assignment of mortgage.
A) mortgage (deed of trust).
With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as A) recourse loans. B) nonrecourse loans. C) conforming loans. D) nonconforming loans.
A) recourse loans.
In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as A) title theory states. B) lien theory states. C) conforming states. D) nonconforming states.
A) title theory states.
17. Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between:
A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years Ans: D Difficulty: Basic Learning Objective: 1
3. Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately:
A. 75 basis points B. 175 basis points C. 275 basis points D. 375 basis points Ans: C Difficulty: Basic Learning Objective: 1
12. When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as:
A. Bankruptcy B. Foreclosure C. Deed in lieu of foreclosure D. Equity right of redemption Ans: C Difficulty: Basic Learning Objective: 5
15. The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business?
A. Chapter 1 bankruptcy B. Chapter 7 bankruptcy C. Chapter 11 bankruptcy D. Chapter 13 bankruptcy Ans: C Difficulty: Basic Learning Objective: 7
22. The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following?
A. Defeasance B. Yield Maintenance Provision C. Demand Clause D. Lockout Provision Ans: D Difficulty: Basic Learning Objective: 2
6. Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums?
A. Demand clause B. Insurance clause C. Escrow clause D. Exculpatory clause Ans: C Difficulty: Basic Learning Objective: 3
26. In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers?
A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Dodd-Frank Wall Street Reform and Consumer Protection Act Ans: D Difficulty: Basic Learning Objective: 9
19. Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)?
A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Home Ownership and Equity Protection Act (HOEPA) Ans: B Difficulty: Basic Learning Objective: 9
25. Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:
A. Equity of redemption B. Statutory redemption C. Strategic default D. Substantive default Ans: B Difficulty: Intermediate Learning Objective: 6
7. Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause?
A. Federal Housing Administration (FHA) loan B. Veterans Affairs (VA) loan C. Conventional home loan D. An assumable home loan Ans: C Difficulty: Intermediate Learning Objective: 3
13. Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT:
A. Foreclosure is a costly process for all parties involved. B. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. . D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount. Ans: C Difficulty: Intermediate Learning Objective: 6
1. In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage?
A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan. Ans: D Difficulty: Basic Learning Objective: 2
27. If a homeowner in mortgage distress owes more than the value of the home, and is unable make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT:
A. Legal costs should be lower with a short sale than with foreclosure B. A short sale usually enables a better sale price and a faster sale than foreclosure C. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage. Ans: D Difficulty: Basic Learning Objective: 5
24. A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:
A. Mortgage (Deed of Trust)
24. A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the: A. Mortgage (Deed of Trust) B. Listing Contract C. Note D. Assignment of Mortgage
A. Mortgage (Deed of Trust)
24. A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:
A. Mortgage (Deed of Trust) B. Listing Contract C. Note D. Assignment of Mortgage Ans: A Difficulty: Intermediate Learning Objective: 4
18. It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed?
A. Offer B. Acceptance C. Possession of the property passes to the buyer D. Title to the property passes to the buyer Ans: D Difficulty: Intermediate Learning Objective: 4
11. Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)?
A. One day B. 30 days C. 60 days D. 90 days Ans: D Difficulty: Basic Learning Objective: 5
14. The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT:
A. The power of sale treatment is faster than judicial foreclosure B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale. Ans: B Difficulty: Intermediate Learning Objective: 6
23. In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as:
A. Title theory states
23. In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as: A. Title theory states B. Lien theory states C. Conforming states D. Nonconforming states
A. Title theory states
23. In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as:
A. Title theory states B. Lien theory states C. Conforming states D. Nonconforming states Ans: A Difficulty: Intermediate Learning Objective: 2
5. For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off?
A. Yield-maintenance prepayment penalties B. Prepayment lockout C. Defeasance prepayment penalty D. Curtailment penalty Ans: C Difficulty: Basic Learning Objective: 2
16. When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to:
A. assume the old loan B. purchase the property subject to the existing loan C. obtain the property through the use of a contract for deed. D. foreclose on the property Ans: B Difficulty: Intermediate Learning Objective: 8
10. In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the:
A. broker B. mortgagor C. agent D. mortgagee Ans: D Difficulty: Basic Learning Objective: 4
21. Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the:
A. demand clause
21. Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the: A. demand clause B. insurance clause C. escrow clause D. exculpatory clause
A. demand clause
21. Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the:
A. demand clause B. insurance clause C. escrow clause D. exculpatory clause Ans: A Difficulty: Intermediate Learning Objective: 2
8. Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be:
A. fully amortizing B. partially amortizing C. nonamortizing D. negatively amortizing Ans: D Difficulty: Basic Learning Objective: 2
2. A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:
A. one-year U.S. Treasury constant maturity rate B. prime rate C. London Interbank Offered Rate (LIBOR) D. cost-of-funds index Ans: C Difficulty: Intermediate Learning Objective: 1
4. Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:
A. rate cap B. teaser rate C. payment cap D. prepayment rate Ans: B Difficulty: Basic Learning Objective: 1
9. With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as:
A. recourse loans
9. With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as: A. recourse loans B. nonrecourse loans C. conforming loans D. nonconforming loans
A. recourse loans
9. With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as:
A. recourse loans B. nonrecourse loans C. conforming loans D. nonconforming loans Ans: A Difficulty: Basic Learning Objective: 2
20. In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as:
A. rescinding B. redlining C. assuming D. holdout Ans: B Difficulty: Basic Learning Objective: 9
an existing loan that can be preserved by a buyer instead of being repaid by the seller when title to the mortgaged property changes hands.
Assumable loan
to become legally responsible for an obligation. This occurs by signing a contract, such as a financial note.
Assume liability
The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT: A. The power of sale treatment is faster than judicial foreclosure B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale
B
Based on your understanding of the relation between the various types of bankruptcy and the foreclosure process, which of the following types of bankruptcy would you expect to be least harmful to a lender's mortgage interest? A) Chapter 1 bankruptcy B) Chapter 7 bankruptcy C) Chapter 11 bankruptcy D) Chapter 13 bankruptcy
B) Chapter 7 bankruptcy
Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of total claims? A) Chapter 1 bankruptcy B) Chapter 7 bankruptcy C) Chapter 11 bankruptcy D) Chapter 13 bankruptcy
B) Chapter 7 bankruptcy
Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)? A) Equal Credit Opportunity Act (ECOA) B) Truth-in-Lending Act (TILA) C) Real Estate Settlement Procedures Act (RESPA) D) Home Ownership and Equity Protection Act (HOEPA)
B) Truth-in-Lending Act (TILA)
In certain states, such as the state of Florida, the transfer of title to the lender does not occur until the borrower defaults. These states are referred to as A) title theory states. B) lien theory states. C) conforming states. D) nonconforming states.
B) lien theory states.
When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to A) assume the old loan. B) purchase the property subject to the existing loan. C) obtain the property through the use of a contract for deed. D) foreclose on the property.
B) purchase the property subject to the existing loan.
In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as A) rescinding. B) redlining. C) assuming. D) holdout.
B) redlining.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as he or she produces the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as A) equity of redemption. B) statutory redemption. C) strategic default. D) substantive default.
B) statutory redemption.
Most adjustable rate mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a A) rate cap. B) teaser rate. C) payment cap. D) prepayment rate.
B) teaser rate.
The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true except A) the power of sale treatment is faster than judicial foreclosure. B) the foreclosed property is typically sold through a public auction administered by the court. C) it is less costly for power of sale to be employed than judicial foreclosure. D) typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale.
B) the foreclosed property is typically sold through a public auction administered by the court.
25. Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:
B. Statutory redemption
25. Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: A. Equity of redemption B. Statutory redemption C. Strategic default D. Substantive default
B. Statutory redemption
14. The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT:
B. The foreclosed property is typically sold through a public auction administered by the court.
14. The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT: A. The power of sale treatment is faster than judicial foreclosure B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale.
B. The foreclosed property is typically sold through a public auction administered by the court.
19. Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)?
B. Truth-in-Lending Act (TILA)
19. Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Home Ownership and Equity Protection Act (HOEPA)
B. Truth-in-Lending Act (TILA)
16. When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to:
B. purchase the property subject to the existing loan
16. When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to: A. assume the old loan B. purchase the property subject to the existing loan C. obtain the property through the use of a contract for deed. D. foreclose on the property
B. purchase the property subject to the existing loan
20. In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as:
B. redlining
20. In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: A. rescinding B. redlining C. assuming D. holdout
B. redlining
4. Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:
B. teaser rate
4. Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a: A. rate cap B. teaser rate C. payment cap D. prepayment rate
B. teaser rate
loan characterized by an amortization term that is longer than the loan term. Because the loan balance will not be zero at the end of the loan term, a balloon payment is necessary to pay off the remaining loan balance in full.
Balloon loan
Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? A. Federal Housing Administration (FHA) loan B. Veterans Affairs (VA) loan C. Conventional home loan D. An assumable home loan
C
For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? A. Yield-maintenance prepayment penalties B. Prepayment lockout C. Defeasance prepayment penalty D. Curtailment penalty
C
Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT: A. Foreclosure is a costly process for all parties involved. B. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. . D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.
C
Added to the index of the adjustable rate is a margin, which is the lender's markup. For standard adjustable rate mortgage (ARM) loans, the average industry margin has been stable at approximately A) 75 basis points. B) 175 basis points. C) 275 basis points. D) 375 basis points.
C) 275 basis points.
The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business? A) Chapter 1 bankruptcy B) Chapter 7 bankruptcy C) Chapter 11 bankruptcy D) Chapter 13 bankruptcy
C) Chapter 11 bankruptcy
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the A) one-year U.S. Treasury constant maturity rate. B) prime rate. C) London Interbank Offered Rate (LIBOR). D) cost-of-funds index.
C) London Interbank Offered Rate (LIBOR).
Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? A) Federal Housing Administration (FHA) loan B) Veterans Affairs (VA) loan C) conventional home loan D) an assumable home loan
C) conventional home loan
When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursue a court-supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as A) bankruptcy. B) foreclosure. C) deed in lieu of foreclosure. D) equity right of redemption.
C) deed in lieu of foreclosure.
For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? A) yield-maintenance prepayment penalties B) prepayment lockout C) defeasance prepayment penalty D) curtailment penalty
C) defeasance prepayment penalty
Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums? A) demand clause B) insurance clause C) escrow clause D) exculpatory clause
C) escrow clause
Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true except A) foreclosure is a costly process for all parties involved. B) only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C) when a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. D) the net recovery by a lender from a foreclosed loan seldom exceeds 80% of the outstanding loan balance and commonly is much less than this amount.
C) when a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property.
3. Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately:
C. 275 basis points
3. Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately: A. 75 basis points B. 175 basis points C. 275 basis points D. 375 basis points
C. 275 basis points
15. The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business?
C. Chapter 11 bankruptcy
15. The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business? A. Chapter 1 bankruptcy B. Chapter 7 bankruptcy C. Chapter 11 bankruptcy D. Chapter 13 bankruptcy
C. Chapter 11 bankruptcy
7. Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause?
C. Conventional home loan
7. Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? A. Federal Housing Administration (FHA) loan B. Veterans Affairs (VA) loan C. Conventional home loan D. An assumable home loan
C. Conventional home loan
12. When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as:
C. Deed in lieu of foreclosure
12. When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as: A. Bankruptcy B. Foreclosure C. Deed in lieu of foreclosure D. Equity right of redemption
C. Deed in lieu of foreclosure
5. For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off?
C. Defeasance prepayment penalty
5. For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? A. Yield-maintenance prepayment penalties B. Prepayment lockout C. Defeasance prepayment penalty D. Curtailment penalty
C. Defeasance prepayment penalty
6. Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums?
C. Escrow clause
6. Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums? A. Demand clause B. Insurance clause C. Escrow clause D. Exculpatory clause
C. Escrow clause
2. A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:
C. London Interbank Offered Rate (LIBOR)
2. A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the: A. one-year U.S. Treasury constant maturity rate B. prime rate C. London Interbank Offered Rate (LIBOR) D. cost-of-funds index
C. London Interbank Offered Rate (LIBOR)
13. Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT:
C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. .
13. Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT: A. Foreclosure is a costly process for all parties involved. B. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. . D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.
C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. .
a court supervised "work-out" for a troubled business.
Chapter 11 bankruptcy
Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court supervised workout for a troubled household?
Chapter 13 bankruptcy
similar to chapter 11, but applies to a household, that allows the petitioner to propose a repayment plan to the court.
Chapter 13 bankruptcy
Based on your understanding of the relation between the various types of bankruptcy and the foreclosure process, which of the following types of bankruptcy would you expect to be least harmful to a lender's mortgage interest?
Chapter 7 bankruptcy
the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of the total claims.
Chapter 7 bankruptcy
From a home mortgage lender's perspective, which statement is true about the effect of bankruptcy upon foreclosure? a. Chapter 7 bankruptcy is the most "lender friendly" form b. Chapter 11 bankruptcy is the most "lender friendly" form c. Chapter 13 bankruptcy is the most "lender friendly" form d. All forms of bankruptcy are equally devastating to a lender's efforts to foreclose e. No form of bankruptcy causes serious problems for a lender seeking to foreclose a mortgage
Chapter 7 bankruptcy is the most "lender friendly" form
a congressional act that encourages mortgage originators to actively lend in their communities and that requires financial institutions to evaluate the "fairness" of their lending practices.
Community Reinvestment Act (CRA)
the second action of "Dodd-Frank" was to drastically alter regulation of home mortgage lending by creating this.
Consumer Financial Protection Bureau (CFPB)
a sales arrangement in which the actual delivery of the deed conveying ownership will not occur until well after the buyer takes possession of the property. This allows the seller to finance the sale through installment payments and to have recourse to the property in case of default by the buyer/borrower.
Contract for deed
an index of adjustable rate mortgages based on the weighted average of interest rates paid for deposits by thrift institutions (savings and loan associations and savings banks).
Cost-of-funds index
In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan
D
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as technical defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? A) 1 day B) 30 days C) 60 days D) 90 days
D) 90 days
Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled household? A) Chapter 1 bankruptcy B) Chapter 7 bankruptcy C) Chapter 11 bankruptcy D) Chapter 13 bankruptcy
D) Chapter 13 bankruptcy
In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing federal consumer financial protection laws; enforcing antidiscrimination laws in consumer finance; restricting unfair, deceptive, or abusive acts or practices; receiving consumer complaints; promoting financial education; and watching for emerging financial risks for consumers? A) Equal Credit Opportunity Act (ECOA) B) Truth-in-Lending Act (TILA) C) Real Estate Settlement Procedures Act (RESPA) D) Dodd-Frank Wall Street Reform and Consumer Protection Act
D) Dodd-Frank Wall Street Reform and Consumer Protection Act
Which of the following acts was passed out of concern for abusive predatory practices in subprime lending? A) Equal Credit Opportunity Act (ECOA) B) Truth-in-Lending Act (TILA) C) Real Estate Settlement Procedures Act (RESPA) D) Home Ownership and Equity Protection Act (HOEPA)
D) Home Ownership and Equity Protection Act (HOEPA)
If a homeowner in mortgage distress owes more than the value of the home and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale except A) legal costs should be lower with a short sale than with foreclosure. B) a short sale usually enables a better sale price and a faster sale than foreclosure. C) a short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner. D) a short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
D) a short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A) how the interest rate is to be computed B) whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result C) whether the borrower is released from liability for fulfillment of the contract D) an unambiguous description of the property that is being pledged as collateral for the loan
D) an unambiguous description of the property that is being pledged as collateral for the loan
Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between A) one and five years. B) five and seven years. C) seven and fifteen years. D) fifteen and thirty years.
D) fifteen and thirty years.
The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following? A) defeasance B) yield maintenance provision C) demand clause D) lockout provision
D) lockout provision
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e., the individual who receives the mortgage claim, is known as the A) broker. B) mortgagor. C) agent. D) mortgagee.
D) mortgagee.
Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be A) fully amortizing. B) partially amortizing. C) nonamortizing. D) negatively amortizing.
D) negatively amortizing.
When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected. While borrowers can recover from this reduction in their credit score, if a default goes into the borrower's records it will remain for A) six months. B) one year. C) five years. D) seven years.
D) seven years.
It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? A) offer B) acceptance C) possession of the property passes to the buyer D) title to the property passes to the buyer
D) title to the property passes to the buyer
17. Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between:
D. 15-30 years
17. Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between: A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years
D. 15-30 years
11. Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)?
D. 90 days
11. Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? A. One day B. 30 days C. 60 days D. 90 days
D. 90 days
27. If a homeowner in mortgage distress owes more than the value of the home, and is unable make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT:
D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
27. If a homeowner in mortgage distress owes more than the value of the home, and is unable make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT: A. Legal costs should be lower with a short sale than with foreclosure B. A short sale usually enables a better sale price and a faster sale than foreclosure C. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
1. In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage?
D. An unambiguous description of the property that is being pledged as collateral for the loan.
1. In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan.
D. An unambiguous description of the property that is being pledged as collateral for the loan.
26. In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers?
D. Dodd-Frank Wall Street Reform and Consumer Protection Act
26. In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Dodd-Frank Wall Street Reform and Consumer Protection Act
D. Dodd-Frank Wall Street Reform and Consumer Protection Act
22. The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following?
D. Lockout Provision
18. It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? A. Offer B. Acceptance C. Possession of the property passes to the buyer D. Title to the property passes to the buyer
D. Title to the property passes to the buyer
18. It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed?
D. Title to the property passes to the buyer
10. In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the:
D. mortgagee
10. In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the: A. broker B. mortgagor C. agent D. mortgagee
D. mortgagee
8. Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be:
D. negatively amortizing
8. Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: A. fully amortizing B. partially amortizing C. nonamortizing D. negatively amortizing
D. negatively amortizing
a legal instrument issued by defaulting borrowers that transfers all rights they have in a property to the lender. Does not necessarily convey a clean title, just whatever interest the defaulting borrower has at the time of conveyance.
Deed in lieu of foreclosure
an instrument used instead of mortgage in some states. The borrower conveys a deed of trust to a trustee, who holds the deed on behalf of both borrower and lender. If the loan obligation is paid off in accordance with the note, the trustee returns the deed to the borrower. But if the borrower (trustor) defaults, the trustee exercises his power of sale to dispose of the property on behalf of the lender.
Deed of trust
the legal right of the lenders to file suit against borrowers when the proceeds from a foreclosure sale do not fully pay off an outstanding loan, as well as any late fees and charges.
Deficiency judgement
In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers?
Dodd- Frank Wall Street Reform and Consumer Protection Act
is impacting home mortgage lending on at least two fronts. First, it is altering the character of home loans by imposing a standard of "ability to repay" and by rewarding an even stronger standard called Qualified Mortgages.
Dodd-Frank Wall Street Reform and Consumer Protection Act
the clause in a mortgage document that requires the borrower to pay off the loan in full if the property serving as security for the loan is sold.
Due-on-sale clause
Which of the following acts prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program?
Equal Credit Opportunity Act (ECOA)
this act prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program.
Equal Credit Opportunity Act (ECOA)
a period of time allowed by courts in every state that grants delinquent mortgage borrowers the opportunity to make overdue payments and come current on the mortgage before foreclosure is complete.
Equity of redemption
a segregated account held by brokers for the deposit of earnest money (deposit) funds. Also, a trust account of a lender used to pay for property taxes, hazard insurance, or other items on behalf of a borrower.
Escrow account
Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums?
Escrow clause
requires a mortgage borrower to make monthly deposits into an escrow account.
Escrow clause
loan provision that releases the borrower from liability for fulfillment of the contract.
Exculpatory clause
a process to force the public sale of property to satisfy the financial obligations of a delinquent borrower to a lender. The legal purpose is to terminate ownership claims, and any subordinate liens, so that title can go to a buyer.
Foreclosure
an act of congress that discourages lenders from avoiding, or redlining, certain neighborhoods in a manner related to minority composition.
Home Mortgage Disclosure Act (HMDA)
Which of the following acts was passed out of concern for abusive predatory practices in subprime lending?
Home Ownership and Equity Protection Act (HOEPA)
an act of congress that addresses abusive, predatory practices in subprime lending and sets a trigger annual percentage rate (APR) and fee levels at which loans become subject to the law's restrictions.
Home Ownership and Equity Protection Act (HOEPA)
a common index of interest rates for income producing property, the London Interbank Offering Rate is a short-term interest rate for loans among foreign banks based in London.
LIBOR
22. The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following? a. Defeasance b. Yield Maintenance Provision c. Demand Clause d. Lockout Provision
Lockout Provision
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:
London Interbank Offered Rate (LIBOR).
Which statement is correct about the right of prepayment of a home mortgage loan? a. All home mortgages loans have the right of prepayment without charge b. Most home mortgage loans have the right of prepayments without charge, but not all, and the borrower should check the loan carefully c. Home mortgage loans give the right of prepayment without charge only in some states d. Home mortgage loans never have the right of prepayment without charge unless it is explicitly stated e. Home mortgage loans never have the right of prepayment without charge
Most home mortgage loans have the right of prepayments without charge, but not all, and the borrower should check the loan carefully
occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the original balance, causing the loan amount to increase.
Negative amortization
a federal law requiring lenders to provide information on all costs associated with closing a residential loan within three business days of the loan application, to use the HUD-1 closing statement, to limit required escrow deposits, and to avoid kickbacks on loan-related services.
Real Estate Settlement Procedures Act (RESPA)
a document by which a lender releases a borrower from personal liability on a note.
Release of liability
the right to retire a mortgage before maturity. The right of prepayment will depend on the law of the state where the property is located and on the particular mortgage contract.
Right of prepayment
in foreclosure, this is the right afforded the defaulting mortgagor to recover the foreclosed property for a period of the time after foreclosure sale by paying the full amount of the defaulted loan plus legal costs of the foreclosure. This right is not available in all states. In states where it exists, it ranges for a few days to several years.
Statutory right of redemption
time period that determines the payment, and the schedule of interest and principal payments on a mortgage.
Term for amortization
term found in a balloon loan that determines when the entire remaining balance on the loan must be paid in full.
Term to maturity
Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)?
Truth in Lending Act
a federal law requiring lenders to provide residential loan applicants with estimates of the total finance charges and the annual percentage rate (APR).
Truth-in-Lending Act (TILA)
A clause in a commercial mortgage loan that requires the borrower to pay the lender a prepayment penalty if the borrower prepays the loan prior to maturity and current market interest rates are lower than the contract rate on the existing mortgage. The prepayment penalty is computed as the present value of interest income to be lost by the lender due to the early prepayment. The idea is to "make whole" the lender. Yield maintenance penalties are found strictly in loans on income-producing properties.
Yield maintenance prepayment penalty
Ways that a lender may respond to a defaulted loan without resorting to foreclosure include all of the following except: a. Offer credit counseling b. Allow short sale to a third party c. Defer or forgive some of the past-due payments d. Accelerate the debt e. Accept a deed in lieu of foreclosure
accelerate the debt
If the lender in a standard first mortgage wishes to foreclose cost effectively, it is crucial to have which clause in the mortgage? a. Acceleration clause b. Exculpatory clause c. Demand clause d. Defeasance clause e. Taking clause
acceleration clause
clause that makes all future payments due upon a single default of a loan. Prevents lender from having to sue for each payment once a single payment is late.
acceleration clause
alternative mortgage from where the interest rate is tied to an indexed rate over the life of the loan, allowing interest rate risk to be shared by borrowers and lenders.
adjustable rate mortgage (ARM)
The real estate settlement procedures act does which of these: a. Requires the use of standard settlement statement for a mortgage loan closing b. Prohibits kickbacks between vendors of closing-related services and lenders c. Requires that a borrower receive a good-faith estimate of closing costs shortly after a loan application d. Requires that the borrower be able to inspect the closing statement a day before the actual closing e. All of the above
all of the above
Which of these statements is true about mortgage loans for income-producing real estate? a. They usually are partially amortizing loans b. They often have a prepayment penalty c. They often are nonrecourse loans d. They can be interest-only loans e. All of the above
all of the above
the repayment of a loan through a series of scheduled balance reductions is called:
amortization
an important characteristic of a loan is whether or not a subsequent owner of the property can preserve it.
assumability
A common risk that frequently interferes with a lender's efforts to work out a defaulted loan through either nonforeclosure means or foreclosure is: a. Equity of redemption b. Statutory right of redemption c. Exculpatory clauses d. Bankruptcy e. Deficiency judgement
bankruptcy
there are three types of bankruptcy distinguished by their section in federal statutes: liquidation, court supervised "workout", "wage-earner's proceedings"
bankruptcy
the date the interest rate on an ARM is recomputed.
change date
To finance purchase of a property where the borrower, the property, or both fail to qualify for standard mortgage financing, a traditional nonmortgage solution is through the: a. Subprime loan b. Deed of trust c. Unsecured loan d. Contract for deed e. Balloon loan
contract for deed
When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as:
deed in lieu of foreclosure
When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursue a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as:
deed in lieu of foreclosure.
With what type of loan security arrangement is the deed held by a neutral third party and returned upon payment of the mortgage in full? a. Contract for deed b. Mortgage c. Deed of trust d. Nonrecourse loan e. Recourse loan
deed of trust
in some states, including California, a _____ of _____ is used instead of a mortgage
deed, trust
the consequence of prolonged delinquency; the failure of a borrower to meet the terms and conditions of a note.
default
A lender may reserve the right to require prepayment of a loan at any time they see fit through a(n): a. Taking clause b. Acceleration clause c. Demand clause d. Due-on-sale clause e. Escrow clause
demand clause
Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the:
demand clause
a right that permits the lender to demand prepayment of the loan.
demand clause
the primary reason lender require escrow payments is because
each required payment reduces the lender's risk of loss
The characteristics of a borrower that can be considered by a lender in a mortgage loan application are limited by the: a. Truth-in-lending act b. Real estate settlement procedures act c. Equal credit opportunity act d. Home ownership and equity protection act e. Community reinvestment act
equal credit opportunity act
Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums?
escrow clause
Which of these points in a mortgage loan would be addressed in the mortgage (possibly in the note as well)? a. Loan amount b. Interest rate c. Late fees d. Escrows e. Loan term
escrows
Which of the following loan clauses releases the borrower from liability for fulfillment of the mortgage loan contract?
exculpatory clause
Foreclosure tends to be quickest in states that: a. Are title theory states b. Are lien theory states c. Have judicial foreclosure d. Have power of sale e. Have statutory redemption
have power of sale
The element of an adjustable rate that is the "moving part" is the: a. teaser rate b. index c. margin d. adjustment period e. none of these
index
a market-determined interest rate that is the "moving part" in an adjustable interest rate.
index rate
requires the borrower/mortgagor to maintain property casualty insurance acceptable to the lender, giving the lender joint control in the use of the proceeds in case of major damage to the property.
insurance clause
the process of bringing the property of delinquent borrowers to public sale that involves court action. Proceeds from the foreclosure sale are used to pay off, to the extent possible, the borrower's creditors.
judicial foreclosure
Which of these aspects of a mortgage loan will be addressed in the note rather than in the mortgage? a. Late fee b. Escrow requirement c. Takings d. Acceleration e. Maintenance of property
late fee
fees assessed for standard home loans when payments are received after the 15th of the month the payment is due. Also found in commercial mortgages.
late fees
legal theory that interprets a mortgage as a lien rather than a temporary conveyance of title.
lien theory
In certain states, such as the state of Florida, the transfer of title to the lender does not occur until the borrower defaults. These states are referred to as:
lien theory states.
The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following?
lockout provision
the "markup", typically two or three percentage points, over and above the index rate, which is charged on adjustable rate mortgages.
margin
for a mortgage loan the number of months until the final payment is called the term to _______
maturity
a lien on real property as security
mortgage
A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:
mortgage (Deed of Trust).
A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:
mortgage (Deed of trust)
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the:
mortgagee
the lender, who receives the mortgage claim.
mortgagee
Because the property is being pledged by the action of the borrower in a mortgage loan contract, the borrower is also referred to as the _______ of the mortgage claim.
mortgagor
the borrower or grantor of the mortgage claim.
mortgagor
Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be:
negatively amortizing
under traditional common law, a mortgage borrower had ___ right of prepayment unless it was explicitly states in the note
no
loans that require interest payments but no regularly scheduled principal payments.
nonamortizing
In many commercial real estate loans, the lender cannot hold the borrower personally liable in the event of a default. Such loans are commonly referred to as:
nonrecourse clause
a mortgage loan where the borrower is not personally liable is called a:
nonrecourse loan
loans that relieve the borrower of personal liability but do not release the property as collateral for the loan.
nonrecourse loans
the document (contract) defining the exact terms of a debt obligation and the liability of the borrower for the obligation.
note
the two documents of a mortgage loan are the ______ and the _____
note, mortgage
caps on adjustable rate mortgages that limit interest rate changes over the life of the loan.
overall caps
a loan alternative in which the outstanding principal is partially repaid over the life of the loan, then fully retired with a larger lump sum "balloon" payment at maturity.
partially amortizing
protects the borrower against the shock of large payment charges; it is possible for the interest rate to increase enough that the resulting payment increase will not cover the additional interest cost.
payment caps
provisions in adjustable rate mortgages that limit change in the contract interest rate from one change date to the next.
periodic caps
liability assumed by borrowers that allows lenders to sue them personally for fulfillment of the contract.
personal liability
mortgage provision that grants the authority to conduct
power of sale
charges, designed to discourage prepayment, incurred when a mortgage is repaid before maturity
prepayment penalties
When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to:
purchase the property subject to the existing loan
When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to:
purchase the property subject to the existing loan.
With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as:
recourse loans
loans in which the borrower has personal liability and the lender has legal recourse against the borrower in case of default.
recourse loans
With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as:
recourse loans.
In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as:
redlining
term used to describe when mortgage lenders avoid certain neighborhoods without regard to the merits of the individual loan applications.
redlining
(recession) the termination of a contract by cancellation. Under the truth-in-lending act, a borrower's right to cancel a nonpurchase loan contract within three days that is secured by his or her principal residence.
rescind
in modern times most state laws provide for some right of prepayment at least for __________ first mortgage loans
residential
if a homeowner in mortgage distress owes more than the value of the home and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale.
short sale
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:
statutory redemption
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as:
statutory redemption.
when a buyer acquires a property having an existing mortgage loan and begins making the required payments without assuming personal responsibility for the note.
subject to
When a buyer of a property with an existing mortgage loan acquires the property without singing the note for the existing loan, the buyer is acquiring the property: a. By assumption b. By contract for deed c. By deed of trust d. By default e. Subject to the mortgage
subject to the mortgage
late fees on residential or home loans have been most severe for ______ loans
subprime
loans made to homeowners who do not qualify for standard (prime) home loans. Subprime loans can have high fees, and costly prepayment penalties that "lock in" the borrower to a high interest rate.
subprime loans
A type of loan that occurred in recent years, which raised concerns about predatory lending practices, was the: a. Adjustable rate mortgage b. Contract for deed c. Purchase money mortgage d. Subprime mortgage e. Power of sale mortgage
subprime mortgage
Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:
teaser rate
the initial interest rate on an adjustable rate mortgage if it is less than the index rate plus the margin at the time of origination.
teaser rate
failure to meet some condition required by a mortgage while still maintaining timely payments is referred to as _______ default
technical
the note defines the exact _____ and _______ of a loan
terms, conditions
The truth-in-lending act gives some mortgages borrowers how long to rescind a mortgage loan? a. 24 hours b. Two days c. Three days d. A week e. A month
three days
lender receives title to the mortgaged property that ripens upon default.
title theory
In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as:
title theory states
It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed?
title to the property passes to the buyer
in mortgage lending, person who holds the deed on behalf of both the borrower and lender in a deed of trust.
trustee
