CH 12 - Residential Mortgages

Question 1

only type of clause legally necessary in a mortgage

Answer 1

defeasance clause

Question 2

clause that allows lender to increase interest rate

Answer 2

escalation clause

Question 3

Which mortgage theory does Florida use?

Answer 3

Lien theory

Question 4

• in writing
• signed by mortgagor
• conform to same requirements of any valid contract
• legal description of property
• witnessed by 2 people

Answer 4

mortgage requirements

Question 5

the pledge of property as security for a loan

Answer 5

hypothecation

Question 6

Who owns a mortgage?

Answer 6

Mortgagee (lender)

Question 7

In Florida, who owns the property on which there is a mortgage?

Answer 7

the Mortgagor (borrower)

Question 8

borrower’s pledge of the mortgaged property, to secure repayment of the prom note

Answer 8

MORTGAGE

Question 9

monthly payment made up of
portion of annual insurance premium and real estate taxes, principal and interest.

Lender requires the borrower to pay this each month

Answer 9

PITI

Principal
Interest
Taxes
Insurance

Question 10

process of lenders evaluating and qualifying an applicant

Answer 10

mortgage underwriting

Question 11

Monthly PITI payment / Monthly gross income =

Answer 11

Housing expense ratio

Question 12

Monthly PITI payment + other monthly obligations / monthly gross income

Answer 12

Total obligations ratio

Question 13

Ratio required by conventional lenders

cannot exceed

Answer 13

28% housing expense ratio and 36% total obligations ratio

Question 14

31% housing expense ratio and 43% total obligations ratio

Answer 14

Ratio for FHA loan

Question 15

Loan amount / Purchase price or appraised value

Answer 15

Loan to value ratio (LTV)

Question 16

Letter that seller obtains from lender, verifies the principal balance owed on the loan

Answer 16

Estoppel certificate

Question 17

When financing the purchase of real estate, what is the role of the mortgagor?

Answer 17

The mortgagor gives a mortgage to a mortgage

Question 18

Purpose of receivership clause

Answer 18

It is used to protect the value of property during the foreclosure process.

Question 19

Which term refers to the right of a mortgagor in default to pay all money owed and prevent the sale of the property at

Answer 19

Equity of redemption

Question 20

What are the two ratios under which a borrower must qualify in order to receive a FHA insured mortgage loan?

Answer 20

Housing expense and total monthly obligations ratios

Question 21

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?

Answer 21

Escalation Clause

Question 22

How was title taken if a seller remained solely liable for the balance of a mortgage loan subsequent to transfer of ownership?

Answer 22

Subject to

Question 23

After all liens have been paid following a foreclosure sale, who do any remaining funds belong to?

Answer 23

Mortgator (borrower)

Question 24

Which of the following would allow a homeowner to exit a foreclosure proceeding by paying any amount due, including fees and interest prior to the completion of the foreclosure process?

Answer 24

Equity of Redemption

Question 25

Where would information such as the loan amount, interest rate, term of the loan, and responsible parties be

Answer 25

Prom note

Question 26

In a lien theory state such as Florida, title to property is held by whom during the time period that the resident is making monthly mortgage payments?

Answer 26

Mortgagor

Question 27

Two discount points on a 7% loan will increase the effective rate of interest on the loan to approximately what rate?

Answer 27

7 1/4%

Question 28

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, marital status, or nationality. Which Act prohibits this?

Answer 28

ECOA

Question 29

A borrower has applied for a loan. The purchase price of the property is $280,000. The borrower has $70,000 as a down payment. If the lender approves the loan subject to the payment of 2 points and the interest rate on the loan is 9%, what is the amount of the loan discount and what is the effective yield to the lender?

Answer 29

Loan discount = $4,200; Effective yield = 9 1/4%

Question 30

What temporarily conveys title to a third party?

Answer 30

Deed of trust