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65 Cards in this Set
- Front
- Back
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A buyer executes chattel mortgage in favor of a lender. What type of property would be covered by a chattel mortgage?
A: The real estate B: An automobile C: An newly installed furnace D: Office furniture and equipment |
d. Explanation: A chattel mortgage is a mortgage that creates a lien on personal property. While an automobile is personal property, it is in no way connected with real property or the use of real property, and would not be deemed a chattel.
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When underwriting a loan application, a mortgage company is usually interested in which of these values?
A: Market value B: Market price C: Liquidation value D: Auction value |
a. Explanation: The mortgage company needs to establish market value, so it knows the LTV position it is in.
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A lender qualifies a new borrower, who signs a note and mortgage. Then, the same terms of the note and mortgage are transferred to a new mortgagor, relieving the original mortgagor of liability. This is known as:
A: Assignment B: Subrogation C: Novation D: Defeasance |
A. Explanation: The substitution of a new contract, with the withdrawing party relieved of liability is novation. Assignment is the transfer of one party's interests in an existing contract to someone else. The assignor is not relieved of liability. Subrogation is the substitution of one creditor for another, with the second having the same legal claims and rights (i.e.. the buyer of a mortgage note). A defeasance clause declares that a mortgage is satisfied when the final payment is made.
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The amount of money paid in regular intervals to reduce the balance owed on a debt is termed:
A: Disintermediation B: Dower C: Dedication D: Debt service |
d. Disintermediation is the movement of money out of a savings account into a higher-yield investment. Dedication is the transfer of real property by private owner to public agency. The debt service is the amount of money paid in regular intervals to reduce the balance owed on a debt. (i.e. payments normally having to do with an amortized loan).
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The term debt service refers to:
A: The movement of money out of a savings account into a higher-yield investment B: The amount of money owing on a note or promise to pay C: The amount of money paid in regular intervals to reduce the balance owed on a debt D: An instrument used in many states in place of a mortgage |
c. Explanation: Debt service refers to the amount of money paid in regular intervals to reduce the balance owed on a debt. The term debt refers to the amount of money owing on a note or promise to pay.
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The owner of a farm and an apartment house desires a mortgage loan and offers both properties as security. He will be required to execute:
A: An amortizing mortgage B: A blanket mortgage C: A building and farm mortgage D: A building and loan mortgage |
b. Explanation: Amortization refers to the steady payoff of a loan through periodic payments of both interest and principle. A blanket mortgage would cover both properties at the same time.
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A borrower pays off his loan; however, the lender refuses to cancel the mortgage. Which of the following clauses of a mortgage has the lender violated?
A: Habendum clause B: Conveyance clause C: Notary clause D: Defeasance clause |
D. Explanation: A defeasance clause states that, when the loan is paid, the mortgage is void. The bank's failure to cancel the mortgage of record is a violation. The habendum clause is the to have and to hold clause. The conveyance clause states that the property is being conveyed in a deed, not a mortgage. The notarial clause is signed by the notary, stating that the mortgage was signed freely and voluntarily by the borrower.
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You have written an offer in which the buyer asked the sellers to pay his half of the escrow fee and his 3 points. The sellers accepted $135,000 for the home and the buyer is going to put $40,000 down. How much will the buyer pay for his points?
A: $2,850 B: $4,050 C: 0 D: $2,430 |
C. Explanation: Read carefully. The sellers, not the buyer, are paying the points.
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Typically, a developer/builder would have what type of mortgage on his development?
A: A wraparound with a partial release clause B: An interest-only with annual payments due C: A blanket D: A conventional fully amortized |
C. Explanation: A wraparound mortgage is a second mortgage written to cover the first and second mortgages on one property. An interest-only mortgage is usually a very short term loan with the payments going only to the interest on the loan. A blank mortgage covers more than one property, with the development and its parcels released as they are sold. A fully amortized conventional loan would cover one parcel only, with part of the payment going toward interest and part going toward principal. The balance is due at the end of the loan period.
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A buyer with badly damaged credit would be most likely to use which financing method?
A: FHA B: VA C: 95% conforming conventional D: RECD |
a.Explanation: FHA is the most lenient of these in regard to damaged credit.
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Which of these financing methods does not use two ratios for qualification?
A: FHA B: VA C: Conforming conventional D: All of these use two ratios |
B. xplanation: VA uses the residential income method in lieu of the housing expense ratio.
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Which of the following is a document that uses real property to secure debt?
A: Promissory note B: Mortgage C: Trustee's deed D: Chattel mortgage |
b. Explanation: The promissory note is the instrument of obligation secured by the mortgage, with the homeowner pledging the real property as security for payment of the promissory note. A trustee's deed is used to transfer property that a trustee is holding in a trust situation. A chattel mortgage uses personal property, not real property, as collateral.
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Just one day prior to a foreclosure sale, the homeowner pays all the past-due payments, late charges, attorney fees etc. The homeowner saves the property under the right called:
A: Statutory right of redemption B: Equitable right of redemption C: Defeasance clause D: Anticipatory repudiation |
b. Explanation: Statutory redemption occurs after the sale has been finalized, and is recognized only in those states which have extended the right of redemption to include the period after the sale. Equitable redemption occurs prior to the sale, when the homeowner avoids foreclosure by paying all past due payments etc. Anticipatory repudiation is a breach of contract before it begins. A defeasance clause in a mortgage states that once the loan is paid in full, that mortgage is canceled.
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A lender advertises that there are reasonable monthly terms available for the purchase of a home. Which of the following disclosures is necessary?
A: Disclosure of interest rate B: Disclosure of interest rate and interest paid over the life of the loan C: Monthly mortgage payments D: No disclosure is necessary |
d. Explanation: A simple statement such as reasonable monthly terms available will not necessitate disclosure under the Truth-in-Lending Act. However, a disclosure of a particular item, such as the interest rate or the monthly payments, would require full disclosure of all interest related items.
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Which federal statute requires a lender to give a borrower a statement of total interest being paid over the life of a loan?
A: Equal Credit Opportunity Act B: Fair Credit Reporting Act C: Federal Fair Housing Act D: Regulation Z |
D. Explanation: Regulation Z of the Truth-in-Lending Act requires that a lender disclose to a borrower all costs of obtaining a loan including interest rate, costs of payments over the life of the loan etc. The Equal Credit Opportunity Act requires equal credit opportunity be given to persons regardless of race, religion, sex etc. The Fair Credit Reporting Act requires that a creditor truthfully record credit remarks on an individual's credit report.
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Which of the following classes of individuals is protected under the Equal Credit Opportunity Act, but not under the Federal Fair Housing Act?
A: Sex B: Ancestry C: Marital status D: Family status |
c. Explanation: While marital status is not a protected class under the Federal Fair Housing Act, it is a protected class under the Equal Credit Opportunity Act. Sex and family status are protected under both acts. Ancestry is not protected under the Federal Fair Housing Act or the Equal Credit Opportunity Act.
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Which of the following classes is protected under the Equal Credit Opportunity Act but is not protected under the Federal Fair Housing Act?
A: Sex B: Family status C: Race D: Marital status |
d. Explanation: While all these classes are protected under the Equal Credit Opportunity Act, the Federal Fair Housing Act does not protect against discrimination based upon marital status. Only the Equal Credit Opportunity Act protects against marital status discrimination.
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Mr. & Mrs. Buyer are approved for a $72,000 loan. Their monthly payments will be $9.35 per thousand for thirty years. How much interest will they pay over the life of the loan?
A: $242,352 B: $170,352 C: $673,200 D: $601,200 |
B. Explanation: 72000 / 1000 = 72 72 x 9.35 = 673.20 673.20 x 360 months (30 yrs) = 242,352 P&I
242,352 minus 72,000 loan = $170,352 interest |
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A mortgagor had a $43,000 loan at 7%. What would the new principal be after the third payment, if the monthly payment was $287?
A: $39,990 B: $42,963 C: $42,891 D: $42,927 |
c. Explanation: 43,000 x 7% = 3,010. 3,010 / 12 = 250.8333 interest for that month
287 250.8333 = 36.1667 principal that month 43,000 36.1667 = 42,963.83 new principal of loan after the first payment 42,963.834 x 7% = 3007.4683 3,007.4683 / 12 = 250.6224 287 - 250.6224 = 36.3776 principal second month 42,963.834 - 36.3776 = 42,927.453 new principal of loan after the second payment 42,927.453 x 7% = 3004.9217 3004.9217 / 12 = 250.4101 2870-0250.4101 = 36.5899 principal the third month 42,927.453 - 36.5899 = 42,890.864 New principal balance after the third payment is $42,890.86 HINT: Find the first months principal 36.1667 and multiply it by the number of payments asked in the question x 3 = 108.50 then subtract that from the original loan 43,000 - 108.50 = $42,891.50 Close enough? |
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Gray purchases a home from Black. Gray will pay $700 a month, and a balloon payment and title transfer will take place in five years. This is a/an:
A: Blanket mortgage B: Purchase money mortgage C: Contract for deed D: Amortized loan |
c. Explanation: A land contract (contract for deed) is a purchase by which title transfer takes place when the entire purchase price is paid.
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Ms. Kelly sold her property herself and has agreed to finance the property. According to the Truth-in-Lending act, Ms. Kelly must reveal:
A: The APR B: All finance fees C: The discount points D: Nothing |
d. Explanation: The seller in a purchase money mortgage is not bound by Truth-In-Lending laws, which require APR, finance fees, and discount points from lenders only.
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The right of a defaulted property owner to recover the property after its sale by paying the appropriate charges is:
A: Equitable right of redemption B: Statutory right of redemption C: Right of repossession D: Certificate of ownership |
b. Explanation: Statutory right of redemption is the right of redemption after the final sale. Right of repossession is not a real estate term. Certificate of ownership refers to the Torrens system of registering, an alternative to the recording system.
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Which disclosure is not required by Regulation Z of the Truth-in-Lending Act?
A: The loan origination fee B: The amount of interest to be paid C: The appraisal fee D: The total monthly payment |
c. Explanation: The fee that the appraiser charges is not a bank charge. The loan origination fee, the amount of interest to be paid, and the total monthly payment are all bank charges, and fall under the Truth-in-Lending Act.
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A bank notifies a homeowner that she is delinquent on her mortgage, and threatens foreclosure. The homeowner offers to give the property to the bank if the bank will not file the foreclosure suit against the homeowner. This process is known as:
A: Deed of trust B: Deed in lieu of foreclosure C: Quick claim deed D: Deficiency judgment |
b. Explanation: A deficiency judgment is the mortgage debt that remains due and payable by the borrower after a sheriff's sale of property from a foreclosure action. A deed of trust is an instrument used in many states in place of a mortgage. A deed in lieu of foreclosure is when the deed to property is given by a borrower to the lender to satisfy the debt and avoid foreclosure (also called voluntary conveyance).
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An instrument used to transfer title from a trustee to the equitable owner of real estate when title was held as collateral for security for a debt is most often called a/an:
A: Deed of trust B: Deed restriction C: Deed of reconveyance D: Deed in lieu of foreclosure |
C. Explanation: In certain title theory states (wherein a home purchaser gives a deed of trust to the bank instead of a mortgage), when the loan is paid in full, the trustee holding the property in trust will execute a deed of reconveyance to convey the property back to the home owner. This is sometimes referred to as a trustee's deed.
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A homeowner's property has been foreclosed upon by the bank and sold at public auction. The homeowner owed $50,000.00 on the mortgage but the property sold for only $40,000.00. To collect the $10,000.00, the lender could do which of the following?
A: File a deed of trust B: File a deed in lieu of foreclosure C: Obtain a deficiency judgment D: Ask for dedication |
c. Explanation: A deficiency judgment is the mortgage debt that remains due and payable by the borrower after the share or sale of property. The judgment is actually for the full amount of the unpaid mortgage debt, but the foreclosure sale proceeds are deducted from the amount due. Dedication refers to the transferring of real property by a private owner to a public agency.
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An additional loan fee charged by lenders to make the yield on lower-than-market interest rate loans competitive with higher interest conventional loans is called:
A: Discount points B: Debt service C: Disintermediation D: Debt |
a. Explanation: Disintermediation is the movement of money out of savings accounts into higher yield investments such as corporate and government instruments. Debt service is the amount of money paid in regular intervals to reduce the balance due on a debt.
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A lender wishes to make the yield on a lower-than-market interest rate loan competitive with higher interest conventional loans. What would the lender charge in order to make the loan more competitive?
A: Debt service B: Deed in lieu of foreclosure C: Penalty points D: Discount points |
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Explanation: Discount points are charged by a lender to make a lower-than-market rate loan more competitive with higher interest conventional loans. A discount point is usually equal to one percent of the loan amount. |
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A lender charges three discount points on a loan. The buyer is buying a $100,000.00 home and is getting an 80% mortgage. How much in discount points would the borrower be required to pay?
A: $3,000 B: $2,500 C: $6,000 D: $2,400 |
D. Explanation: Discount points are calculated on the loan amount, not the on the sale price. An 80% loan of $100,000.00 house is $80,000.00. Each discount point is 1% of the loan amount; thus, the points would be computed as follows: $80,000.00 x 3% equals $2,400.00.
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A investor decides to take money out of a savings account and invest it in corporate securities in order to obtain a higher yield on his investment. This movement of money is known as:
A: Discrimination B: Disintermediation C: Dedication D: Debt service |
b. Explanation: The movement of money out of a savings account into a higher-yield investment such as corporate and government instruments is called disintermediation. Debt service is the amount of money paid in regular intervals to reduce the balance owed on a debt.
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A provision of a promissory note or mortgage where, upon the happening of a certain event (i.e. default on payment), the entire amount of the unpaid loan balance becomes due immediately, is known as:
A: Inchoate clause B: Acceleration clause C: Habendum clause D: Indemnification clause |
b. Explanation: Inchoate refers to an incomplete interest such as a spouse's dower interest during the lifetime of the owning spouse. The habendum clause refers to the clause that is included after a granting clause in many deeds (begins to have and to hold), describing the type of estate granted. Indemnification refers to personal guarantee to hold a person harmless from any further liability (i.e. an insurance company indemnifies a insured against any loss resulting from a flaw in title).
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A buyer is late with the monthly mortgage payments. The lender could declare the entire unpaid loan amount due immediately under which of the following clauses?
A: Acknowledgement clause B: Acceleration clause C: Hypothecation clause D: Accretion clause |
b. Explanation: Hypothecation refers to the pledge of the property as security for collateral for a loan. The term accretion refers to the addition of soil to property by the gradual operation of natural causes (i.e. the opposite of erosion).
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A type of financing available for real estate mortgages in which the annual percentage rate will differ from year to year according to terms specified by the lender is known as:
A: Amortized loan B: Fixed rate mortgage C: Fluctuating loan D: Adjustable rate mortgage |
d. Explanation: Amortization refers to the methods of paying off a loan with varying amounts of principal and interest each month, although the interest rate may stay the same. By definition, the percentage interest rate of adjustable rate mortgages varies from year to year. Fixed rate mortgages are those in which the annual percentage rate never changes.
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A person receiving an adjustable rate mortgage would expect to:
A: Pay the same amount of interest every month B: Pay interest only toward the loan and then one balloon payment at the end of the term C: The interest to fluctuate on a year-to-year basis according to terms specified by the lender D: To pay no interest on the loan |
Explanation: A person with an adjustable rate mortgage would expect the interest rate to change yearly according to terms specified by the lender. With a fixed-rate mortgage the interest rate does not fluctuate. A straight line mortgage is a loan in which only interest is paid and then one balloon payment of principal is made at the end of the loan.
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An alienation clause in a mortgage refers to the clause that:
A: Allows the lender to call for full payment of the mortgage because the owner transferred ownership to another party B: Pledges the property as security to a third party C: Says the entire mortgage is due if the owner moves outside the United States D: Allows the lender to charge a penalty for early payment |
A. Explanation: Often times called the "due on the sale clause", the alienation clause says that the entire mortgage balance will be "due on the sale" of the property. The hypothecation clause is the transfer of property as a pledge of security for repayment of the debt.
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A clause used in a mortgage allowing the lender to call for the full payment of the mortgage because the owner transferred ownership of the property to a third party is known as the:
A: The hypothecation clause B: Alienation clause C: Prepayment clause D: Appreciation clause |
B. Explanation: The alienation clause sometimes known as the due on sale clause causes the mortgage to become due when the property is transferred. The hypothecation clause is a clause that pledges the property for repayment of the debt. There is no such thing as an appreciation clause in a mortgage.
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The term amortization refers to:
A: Payment of a debt in regular periodic installments of principal and interest B: Interest-only payments over the life of a loan C: A balloon payment at the end of a loan D: A repayment of a loan by principle payment only |
a. Explanation: Amortization refers to payment of debt in regular periodic installments. An interest-only payment refers to a straight term or straight line mortgage and often includes a balloon payment at the end of the loan.
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Question: Payment of debt in regular periodic installments of principal and interest is referred to as a/an:
A: Straight term loan B: Amortization loan C: Assignment of loan D: Assumption of loan |
b. Explanation: A straight term loan involves interest-only payments usually with one balloon payment of principle at the end. An amortized loan involves payment of debt in regular periodic installments of principle and interest. Assignment and assumption refer to the giving and taking of liability from party to another under a mortgage.
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The seizing of property by court order as security for a debt or judgment is known as:
A: Alienation B: Encumbrance C: Attachment D: Capitalization |
C. Explanation: The seizing of property by court order is called an attachment. Usually, the property is attached to be sold at public auction to satisfy a judgment.
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Property is attached in order to:
A: Provide security for payment of a debt or judgment B: Compute valuation for mortgage loan purposes C: Construct zoning boundary lines D: Compute cost replacement value |
a. Explanation: Attachment is the court-ordered seizure of property made available as security for payment of a debt.
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A partially amortized note which reduces part of the principal by the time the final payment is due is often called a/an:
A: Balloon payment/balloon note B: Fully amortized loan C: Wraparound mortgage D: Conventional loan |
a. xplanation: A balloon payment/balloon note is partly amortized, with a lump sum payment of the principal due at the end of a loan. A fully amortized loan is a complete reduction of principal each month with steady payments of interest and principal and results in the loan being paid in full.
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A lump sum payment of principal is due at the end in which type of promissory note?
A: A fully amortized note B: A balloon note C: A wraparound note D: A major note |
b. Explanation: A fully amortized mortgage would not have a lump sum payment due at the end of the loan.
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What type of single mortgage loan exists when two or more different parcels of property are offered as security for the loan?
A: Wraparound mortgage B: Fixed rate mortgage C: Variable rate mortgage D: Blanket mortgage |
d. Explanation: A single mortgage loan which posts two properties as collateral is called a blanket mortgage; it covers both properties.
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A blanket mortgage would involve which of the following?
A: A single loan with two or more parcels of property offered as security B: Two loans combined into one interest rate C: A loan with a balloon payment at the end D: A fully amortized mortgage |
a. Explanation: A blanket mortgage is a single loan for which two or more parcels are offered as security. A wraparound mortgage is created when two separate mortgages are wrapped into one and combined at a new interest rate.
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A homeowner receives a duplicate 1099 form from the bank showing how much interest has been paid over the last year and what the principal amount is remaining on the mortgage. This document that the homeowner receives is called:
A: Certificate of title B: Certificate of sale C: Certificate of habitation D: Estoppel certificate |
d. Explanation: A certificate of title, also known as an opinion letter, gives an opinion stating that the title is vested in a particular individual. A certificate of sale is issued to a buyer at a judicial sale and entitles a buyer to the deed upon confirmation of sale by court. An estoppel certificate, sometimes called a certificate of no defense, is a legal instrument used by the bank to stop the mortgage and to indicate what the mortgage balance is on a certain date, after which the mortgagor has no defense unless he/she contests in a timely manner.
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Question: Each January, a homeowner receives an estoppel certificate from his bank indicating:
A: The amount of the taxes and insurance held in escrow B: The amount of principal remaining on the mortgage C: The amount of real property taxes that the homeowner will owe for the upcoming year D: The closing cost incurred in selling the home |
b. Explanation: An estoppel certificate, also called a certificate of no defense, is a legal instrument used by a bank to stop the mortgage on a certain date where the homeowner agrees that the mortgage balance is correct, after which the homeowner has no defense to contest the amount shown still due and owing.
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After buying property at a sheriff's foreclosure auction, what document would a person receive to prove he is entitled to a deed upon confirmation of sale?
A: Certificate of title B: Certificate of no defense C: Certificate of sale D: Certificate of habitation |
c. Explanation: A certificate of sale, issued to a buyer at a judicial sale (foreclosure action), entitles the buyer to a deed upon confirmation of sale by the court if the land is not redeemed during the redemption period. A certificate of no defense, also called an estoppel certificate, is a legal instrument used by a mortgagee to stop the mortgage on a certain date where the mortgagor agrees that the mortgage balance is correct; after that date, the mortgagor has no defense. A certificate of title (also known as an opinion letter) is issued by a lawyer who has examined an abstract and has given an opinion stating the title is vested in a particular individual.
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Interim financing used during construction of a building followed by long term financing is called:
A: Construction loan B: Bridge loan C: Conventional loan D: FHA mortgage |
A. Explanation: While a construction loan could be a conventional loan, a conventional loan usually refers to a non-government backed loan. Construction loans are sometimes called take out loans. Loan proceeds are made in installment payments as completion of the improvements occur.
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Which loan is not guaranteed or insured by a government agency?
A: FHA B: VA C: Conventional D: Land contract |
C. Explanation: FHA is insured by the federal government, while VA loans are guaranteed by the federal government. A land contract is not a loan, but rather a method of purchasing property on an installment plan.
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A buyer applies for a loan that is neither insured nor guaranteed by a government agency. For which type of loan is the borrower applying?
A: FHA B: VA C: Conventional D: Land contract |
c. Explanation: FHA is insured by the federal government, while VA loans are guaranteed by the federal government. A land contract is not a loan, but rather a means of buying property on an installment plan.
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A G.I. loan is the same as:
A: A FHA loan B: A VA loan C: A conventional loan D: A co-insured loan |
b. Explanation: A G.I. loan, often referred to as a soldier's loan, is guaranteed by the Veterans' Administration. It is not insured (as an FHA loan is). A conventional loan is not backed by the federal government in any way.
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An owner's interest or value in property, over and above the mortgage debt is known as:
A: Escrow B: Equality C: Equity D: Surplus |
c. Explanation: Escrow is a holding of funds until final documentation is received by both parties.
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A conventional loan is:
A: Guaranteed by a government agency B: Not guaranteed or insured by a government agency C: Obtainable through FHA D: A lower-interest rate loan than an FHA loan |
b. Explanation: Remember: FHA insurers, VA guarantees, conventional does neither. A conventional loan doesn't have the backing of a federal agency, either in the form of insurance or guarantee.
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In a foreclosure sale, the debtor:
A: May not bid on the property B: Advertises to secure exposure for the sale C: Is freed of any future responsibility regarding the liens D: May be a successful bidder and be awarded the title to the property |
D. Explanation: Anyone may bid at a sheriff's foreclosure auction. If the property does not bring enough sale proceeds to cover the liens, then the debtor is not freed from future responsibilities, but is liable on the note under a deficiency judgment.
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A mortgage that has not been recorded:
A: Has no legal effect B: Is effective against a subsequent purchaser of the mortgaged premises, provided that the purchaser gave value and did not have knowledge of the unrecorded mortgage C: Is a lien on the property D: Is effective between the lender on the borrower only |
d. Explanation: While the mortgage may not become a lien unless it is recorded, it is still effective between the lender and the borrower only. It would not be effective against the subsequent purchaser who had no knowledge of the unrecorded mortgage. A mortgagor would still be personally liable under the mortgage and promissory note.
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The type of lender having the greatest percentage of assets invested in residential mortgages is a/an:
A: Savings and loan association B: Commercial bank C: Life insurance company D: Mutual savings bank |
A. Explanation: A savings & loan is the most invested. The premise of a savings & loan is to take the deposits in savings accounts and use them to make loans for depositors.
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Discounts or points on mortgages are:
A: A return in excess of interest paid by the mortgagee to a purchaser on his/her mortgage B: A fee charged by lenders for processing a mortgage C: A charge by the lender to increase the yield on money invested D: None of the above |
c. Explanation: Don't forget who the mortgagor and the mortgagee are. The bank is the mortgagee and does not pay interest. The purchaser is the mortgagor. A fee charged by the lender for processing the mortgage is called the loan processing fee, and is charged in addition to points.
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Mortgages are recorded to:
A: Assure amortization payments B: Create a valid lien C: Transfer title to the mortgagee D: Comply with truth-in-lending regulations |
B.Explanation: A mortgage is not a lien until is has been recorded. It still may be binding between the bank and the purchaser, but it would not create a lien on the property. Therefore, subsequent purchasers could not be held to have knowledge of the mortgage. The Truth-in-Lending Act requires that the buyer be given a good faith estimate of the cost of interest, loan payments etc, and does not require that the mortgage be recorded.
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The longer the term of the loan:
A: The lower the amount of total interest paid B: The higher the amount of payments on principal C: The higher the number of monthly payments on the loan D: The lower the number of total payments on principal |
C. Explanation: The longer the term of the loan, the more payments will be made and the more interest will be paid over the life of the loan. By restructuring the loan from a 20-year to a 30-year loan, for example, the monthly payment would decrease but the amount of interest paid over the life of the loan would increase.
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While both the mortgage deed and the mortgage note are signed by the borrower, the note is:
A: Not recorded B: Not really necessary C: Signed in duplicate with a copy each for the buyer and the bank D: Retained by the borrower as the reminder of its maturity date |
A. Explanation: The mortgage deed is recorded to create the lien on the property. The mortgage note is the personal promissory note that is retained by the bank. It is not signed in duplicate, as this would create two debts, which could both be called by the bank.
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Extinguishing a debt by equal payments of regular intervals over a specified period of time is called:
A: Equity B: Amortization C: Appraisal D: Investments |
b. Explanation: Equity is defined as the amount of value of the property over and above a debt.
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The money for making FHA loans is provided by:
A: The Federal Housing Administration B: A government agency C: Federal Reserve Bank D: Lending institutions |
d. Explanation: Lending institutions provide the money for all loans. FHA insures that a loan will be repaid to a lending institution, while VA guarantees the fact that the veteran's loan will be repaid to a lending institution. The money actually comes from the lending institutions.
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A court order instructing an official (i.e. a sheriff) to sell property in order to pay a judgment is called a/an:
A: Foreclosure B: Writ of execution C: Deficiency judgment D: Attachment |
B. Explanation: Foreclosure is the proceeding which declares a mortgage void and forces the sale of property to satisfy the debt. The court order directing the official to seize and/or sell the property is called a writ of execution.
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Mortgages are recorded in order to:
A: Assure amortization payments B: Create a valid lien C: Transfer title to the mortgagee D: Comply with the Truth-in-Lending regulations |
B. Explanation: While the promissory note creates a debt, the mortgage is given to secure repayment of the debt, but it becomes a lien against the property only when it is recorded.
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If the loan value is 80%, and the property was appraised at $86,500.00 and sold for $88,000.00, how much would the purchaser be permitted to borrow?
A: $73,500 B: $70,400 C: $65,200 D: $69,200 |
D. Explanation: The loan value is based upon the appraised value, not the sale price. The appraised value is $86,500.00 and 80% of that amount is $69,200.00. This would be the maximum the purchaser would be permitted to borrow.
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