12- Real Estate Finance Flashcards
What secures the repayment of a debt?
A mortgage
Which legal instrument evidences the debt and states the interest rate, term, payment requirement, and other information related to the loan?
Promissory Note
When financing the purchase of real estate, what is the role of the mortgagor?
The mortgagor gives a mortgage to a mortgagee
Which clause in a mortgage requires the lender to acknowledge performance by the borrower?
Defeasance
In order to qualify for an FHA 203b insured mortgage loan, and applicant’s housing expense ratio cannot exceed what percentage?
31%
What is the purpose of a receivership clause in a mortgage?
It is used to protect the value of property during the foreclosure process
What refers to the right of the mortgage are in default to pay all money owed and prevent the sale of the property at foreclosure?
Equity of redemption
What is the primary purpose of discount points?
To decrease the monthly payment required
What are the two ratios under which a borrower must qualify in order to receive a FHA insured mortgage loan?
Housing expense and total monthly obligations ratios
What process is used by loan underwriters to determine if applicants are satisfactory credit risks?
Qualifying
Two discount points on a 7% loan will increase the effective rate of interest on the loan to approximately what rate?
7 1/4%
How was title taken if a seller remained solely liable for the balance of the mortgage loan subsequent to transfer of ownership?
Subject to
After all liens have been paid following a foreclosure sale, who do any remaining funds belong to?
The mortgagor
What is not required by the real estate settlement procedures act (RESPA)?
Disclosure of the annual percentage rate (APR)
What is required by the real estate settlement procedures act (RESPA)?
That borrowers be informed of all settlement costs involved in the purchase of a home when funds are obtained from a federally regulated lender
In a lien theory states such as Florida, title to property is held by whom during the time period that the resident is making monthly mortgage payments?
Mortgagor
If a property owner is foreclosed upon, and the foreclosure result in a sale price greater than the amount of the outstanding liens, the excess will likely be paid to whom?
The mortgagor
What not required to be disclosed by the real estate settlement procedures act (RESPA)?
ADA Accessibility Report
A buyer purchased a home and arranged financing at an interest rate of 4.5%. At closing the buyer realized that the true interest rate was actually 5.99%. This would be a violation of which legislation?
Truth in lending act
After paying mortgage payments for many years, a homeowner finally paid the last payment. How does the lender extinguish the mortgage lien on the property?
The lender would file a satisfaction of mortgage in the county records where the property is located
A borrower is consistently late on their mortgage payments, so the bank exercises its ability to raise the interest rate. Which clause in the mortgage document allows the lender to do this?
Escalator clause
Which would offer a potential borrower the most favorable interest rate over the life of the loan?
4.0 plus 8 points
8 points x 1/8% = 8/8% or 1% in interest rate; 4% (rate paid by borrower) + 1% (increase due to the discount) = 5% (effective yield)
Which clause found in a deed would state that the lender could only look to the property itself for satisfaction of the mortgage debt?
Exculpatory clause
Lenders are required to judge loan applicants on the basis of credit rating, income, expenses and assets, without regard to their age, race, religion, sex, martial status, or nationality. Which Act prohibits this discrimination?
ECOA
