Ch 13 Quizzes Flashcards
T/F: A lien is a possessory interest in property
False
A lien is a financial encumbrance, so it is a nonpossessory interest.
T/F: Ownership of a property can be transferred without paying off the liens against it.
True
A new owner may take title to a property subject to existing liens.
T/F: A promissory note collateralizes a property to act as security for a loan.
False
A security instrument collateralizes a property so that it acts as security for a loan, and gives the lender the right to foreclose in the event of default.
** A security instrument may be either a mortgage or a deed of trust.
Under a mortgage, the borrower is called a mortgagee.
False
A mortgagee is the lender in a mortgage loan transaction;
a mortgagor is the borrower in a mortgage loan transaction.
Under a deed of trust, the lender is called a beneficiary
True
Under a deed of trust:
The lender is the beneficiary of a deed of trust;
The borrower is the trustor; and
The trustee is a third party who will handle foreclosure, if needed
This type of clause states that if the borrower defaults, the lender may demand payment of the entire loan balance.
Acceleration.
An acceleration clause allows a lender to call the note, in other words, demand payment of the entire loan balance immediately.
This type of clause gives the lender the right to accelerate the loan if the borrower sells the security property.
Alienation.
An alienation clause, or due-on-sale clause, allows the lender to demand repayment of the entire loan upon the sale of the property.
This type of clause may impose penalties for repaying all or a portion of a loan before it is due.
Prepayment.
In some cases, a lender may impose a prepayment penalty to dissuade borrowers from prepaying a loan.
This type of clause gives the security instrument lower lien priority than another security instrument that will be recorded later.
Subordination.
A subordination clause means that a mortgage recorded first will have lower priority than another loan (such as a construction loan) that will be recorded later.
This type of clause requires the lender to release the security property from the lien once the loan is paid off.
Defeasance.
A defeasance clause requires the lender to record a document releasing the security property from the lien once the loan is paid off.
(T/F) A deed of trust is generally foreclosed through a nonjudicial process.
True.
Mortgages are generally foreclosed judicially; deeds of trust are generally foreclose nonjudicially.
(T/F) A document called a lis pendens gives notice that a property is subject to a pending foreclosure suit.
True.
A lis pendens provides notice to potential buyers that title to the property may be affected by the outcome of a pending lawsuit.
(T/F) A court’s order directing the sheriff to sell a property is known as a decree of foreclosure.
True.
The court order that results from a foreclosure suit is a decree of foreclosure.
(T/F) In a judicial foreclosure process, the property is sold to the public at a sheriff’s sale.
True.
A foreclosed property is sold through a sheriff’s sale, if the judicial foreclosure process is being used.
(T/F) If the proceeds of a sheriff’s sale were adequate to repay the debt and the costs, the borrower has a one-year statutory redemption period.
False.
If the proceeds of a sheriff’s sale were adequate to repay the debt and costs, the borrower has a three-month statutory redemption period.
(T/F) Judicial foreclosure is faster and less expensive than nonjudicial foreclosure.
False.
Nonjudicial foreclosure (which is associated with deeds of trust) is faster and less expensive than judicial foreclosure.
(T/F) In a nonjudicial foreclosure, the borrower has the right to reinstate the loan by repaying the delinquency plus costs at any point up until five days before the sale.
True.
The right to reinstate in a nonjudicial foreclosure applies up until five days before the trustee’s sale.
(T/F) Deficiency judgments are not allowed for loans used to purchase owner-occupied residences with one to four units.
True.
Deficiency judgments are not allowed in typical home loans, as they are prohibited in loans for purchase of owner-occupied residences with one to four units.
(T/F) The Truth in Lending Act is implemented through Regulation Z.
True.
Regulation Z is intended to implement the protections created in the Truth in Lending Act.
(T/F) A consumer loan for less than $54,600 that is secured by real property is not subject to the Truth in Lending Act.
False.
The Truth in Lending Act applies to loans that are for $54,600 or less, or secured by real property, so it applies in this scenario under both criteria.
(T/F) A loan estimate disclosure must contain the annual percentage rate and the total interest percentage.
True.
Under TILA and RESPA, lenders must disclose the total interest percentage and annual percentage rate.
(T/F) All consumer loan borrowers have a three-day right of rescission under TILA.
False.
Borrowers for home equity loans have a three-day right of rescission. This right isn’t provided for loans for the purchase of real property.
(T/F) If a loan advertisement states the loan’s monthly payment amount, then all loan terms must be disclosed.
True.
If an advertisement discloses any loan term (other than cash price or annual percentage rate), then all loan terms must be included.
(T/F) The Mortgage Loan Broker Law is a state law that applies to real estate agents who act as mortgage brokers.
True.
The Mortgage Loan Broker Law requires real estate agents acting as mortgage brokers to give a disclosure statement to borrowers concerning costs involved in obtaining the loan.
(T/F) Under the Mortgage Loan Broker Law, all balloon payments are prohibited in seller financing.
False.
Balloon payments are prohibited on loans that are to be paid off in less than three years (or six years, if the security property is an owner-occupied home).
(T/F) It is a predatory practice to steer borrowers toward a more expensive loan when they could qualify for a less expensive loan.
True.
Predatory steering is a common form of predatory lending, where borrowers are steered to unnecessarily expensive loans.
(T/F) A “high-cost” loan is likely to have a higher interest rate than a “higher-priced” loan.
True.
A “high-cost” loan under HOEPA has an interest rate that is higher than that of a “higher-priced” loan.
(T/F) California’s predatory lending laws apply to residential purchase loans as well as home equity loans.
True.
California’s predatory lending laws apply to high-cost residential purchase loans as well as home equity loans.
