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Flashcards in UNIT 14 & 15 Deck (61)
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1

Charging more interest than is legally allowed is known as
a. escheat.
b. usury.
c. a deficiency.
d. an estoppel.

b. usury.

2

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

a. gives the mortgage.

3

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

c. is the primary evidence of a debt.

4

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

c. conveyance of legal title at a future date.

5

The administrative fee charged by the lender to make the loan is
a. a loan discount fee.
b. an advance interest payment.
c. a loan origination fee.
d. a mortgage insurance premium.

c. a loan origination fee.

6

A homebuyer recently financed his first home with a fixed-rate conventional loan. The type of interest he will pay over the life of the loan is probably
a. simple interest.
b. variable interest.
c. compound interest.
d. discounted interest.

a. simple interest.

7

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

b. loan-to-value ratio.

8

If the amount realized at a mortgage foreclosure auction is more than the amount of the indebtedness and expenses, then the excess belongs to the
a. grantor.
b. beneficiary.
c. trustee.
d. county.

a. grantor.

9

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to
a. ensure that buyers do not borrow more money than they can repay.
b. make real estate brokers more responsive to the needs of buyers.
c. help sellers know how much money is required to purchase the property.
d. see that borrowers know all of their settlement costs.

d. see that borrowers know all of their settlement costs.

10

A homebuyer financed his home five years ago with a high loan-to-value, fixed-rate loan. Due to a job transfer, the owner must move, but his home has suffered significant depreciation in value since purchase. Which of the following is NOT a legal way to handle the disposition of the property?
a. Ask the lienholder to participate in a short sale transaction.
b. The seller uses other assets to make up the shortfall between the outstanding mortgage loan balance and the proceeds from the sale.
c. The owner could abandon the house and stop making loan payments.
d. The owner can convert the house to a rental property and use the rent to make mortgage payments.

c. The owner could abandon the house and stop making loan payments.

11

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

c. subordination agreement.

12

If the monthly interest payment at 6% is $1,050, the principal amount of the loan is
a. $63,000.
b. $75,600.
c. $126,000.
d. $210,000.

d. $210,000.

$1,050 × 12 mos. = $12,600 annual int.
÷ 0.06 = $210,000 LV

13

If the proceeds from the sale of a foreclosed property are less than the amount required to satisfy the outstanding mortgage loan debt and legal expenses, the grantor may be responsible for
a. a default judgment.
b. a deficiency judgment.
c. liquidated damages.
d. punitive damages.

b. a deficiency

14

The clause in a deed of trust or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default by the borrower is the
a. alienation clause.
b. escalator clause.
c. forfeiture clause.
d. acceleration clause.

d. acceleration clause.

15

A building was sold for $115,000. Down payment in the amount of $15,000 was deposited in escrow, and the buyer obtained a new loan for the balance of the purchase price. The lender charged two discount points. What was the total amount charged to the buyer for points in this purchase?
a. $2,000
b. $2,300
c. $3,000
d. $14,375

a. $2,000

$115,000 SP – 15,000 DP =
$100,000 LV × 0.02 = $2,000 pts.

16

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

d. the satisfaction of mortgage is recorded.

17

A deed of trust differs from a mortgage in all of the following ways EXCEPT
a. the number of parties involved in the loan.
b. the obligation of the borrower to repay the funds.
c. the redemption rights allowed after foreclosure.
d. the time period permitted to cure a default.

b. the obligation of the borrower to repay the funds.

18

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

c. personally responsible for paying the principal balance.

19

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

d. equity.

20

The trustee foreclosed on a property after the borrower defaulted on the loan payments. At the foreclosure auction, however, the house sold for only $129,000. The unpaid balance of the loan at the time of the sale was $140,000. What must the lender do to recover the $11,000 the borrower still owes?
a. Sue for damages
b. Sue for specific performance
c. Seek a judgment by default
d. Seek a deficiency judgment

d. Seek a deficiency judgment

21

The right a grantor has to regain the property ownership by paying the debt after a
foreclosure sale is called
a. acceleration.
b. redemption.
c. reversion.
d. recapture.

b. redemption.

22

The clause in a mortgage loan instrument that would prevent the assumption of the
mortgage loan by a new purchaser is
a. an alienation clause.
b. a power of sale clause.
c. a defeasance clause.
d. a certificate of sale clause.

a. an alienation clause.

23

The defeasance clause in a deed of trust requires the trustee in a specified situation to
execute
a. an assignment of mortgage.
b. a satisfaction of mortgage.
c. a subordination agreement.
d. a partial release agreement.

b. a satisfaction of mortgage.

24

The seller agrees to sell the property to the buyer for $100,000. The buyer was unable to
qualify for a mortgage loan for this amount with a traditional lender so the seller and
buyer enter into a contract for deed. The interest the buyer has in the property under a
contract for deed is
a. legal title.
b. equitable title.
c. joint title.
d. reversionary title.

b. equitable title.

25

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

a. a deed in lieu of foreclosure.

26

Mortgage lenders want assurance that future real estate taxes will be paid. The MOST
common way to do this is to require the borrower to
a. obtain lender title insurance coverage.
b. prepay the property taxes by January 31 of each year to satisfy the tax liability for
the year.
c. make installment payments into an escrow account.
d. submit receipts to the lender showing the taxes have been paid.

c. make installment payments into an escrow account.

27

When real estate is sold under an installment land contract, the legal title
a. is subject to a purchase money mortgage agreement.
b. must be transferred to a land trust.
c. is held by the seller until the purchase price is paid in full.
d. is transferred to the buyer at settlement.

c. is held by the seller until the purchase price is paid in full.

28

Which of the following is TRUE about an installment land contract?
a. The buyer is given immediate possession and use of the property.
b. The seller delivers a deed to the buyer.
c. The buyer obtains a mortgage loan from a traditional lender.
d. The seller delivers legal title to the buyer at settlement.

a. The buyer is given immediate possession and use of the property.

29

If a buyer obtains a $150,000 mortgage at 7½% annual interest with one and one-half
points, how much will the lender charge for the points at settlement?
a. $2,250
b. $11,250
c. $17,250
d. $22,500

a. $2,250


$150,000 LV × 0.015 = $2,250 pts.

30

If the yield on a 30-year fixed-rate loan is 7¼% and a mortgage lender charges one point,
what is the interest rate on the mortgage note?
a. 7⅛%
b. 7¼%
c. 7¾%
d. 8¼%

a. 7⅛%

7¼% – ⅛% = 7⅛%