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Real Estate (NJ) > (Ch. 14) Mortgages And Financing > Flashcards

(Ch. 14) Mortgages And Financing Flashcards

1
Q
  1. When a buyer “assumes agrees to pay” an existing loan on the property:

(A) seller is relieved from liability.
(B) the buyer, together with the seller, is liable on the loan.
(C) only the seller is liable
(D) only the buyer is liable.

A

B

Unless there is a novation, the seller is not released under an assumption.

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2
Q
  1. In a purchase money mortgage:

(A) the seller takes back a mortgage as part of the purchase price.
(B) the seller is disposing of a mortgage loan. (C) the buyer is denied the prepayment privilege.
(D) the seller is denied the prepayment privilege.

A

A

A is generally true, however, all loans for real estate purchases are referred to as purchase money mortgages

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3
Q
  1. The loan-value ratio relates the loan to:

(A) sales price
(B) appraised value
(C) A or B, whichever is higher.
(D) A or B, whichever is lower.

A

D

The ratio between the amount borrowed and the lesser of the contract price or appraised value.

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4
Q
  1. The dollar value of a discount point is:

(A) 1% of the appraised value.
(B) 1% of the loan amount.
(C) 1% of the down payment.
(D) 1% of the selling price.

A

B

One point is 1% of the loan amount, not 19% of the selling price.

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5
Q
  1. A mortgage is discharged by all of the following EXCEPT:

(A) satisfaction.
(B) execution of a quitclaim deed by the mortgagee
(C) death.
(D) release.

A

C

Death does not terminate contractual obligations; they are binding on the estate.

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6
Q
  1. A clause in a mortgage which permit the lender to call the entire balance due if the property is sold or otherwise conveyed by the mortgagor is called

(A) defeasance clause.
(B) alienation clause.
(C) habendum clause.
(D) subrogation clause.

A

B

A form of acceleration clause.

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7
Q
  1. A buyer who is willing to pay more than the FHA loan amount can do which of the following? (

A) Increase the points paid
(B) Increase the mortgage insurance premium. (C) Increase the down payment.
(D) Increase the interest rate.

A

C

The buyer can either back out or make up the difference between the appraised value and the purchase price.

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8
Q
  1. A prospective home purchaser:

(A) cannot pay more than the CRV for a home.
(B) can pay more than the CRV or the FHA appraisal
(C) can pay more than the CRV but not more than the FHA appraisal.
(D) cannot pay more than the CRV but can pay more than the FHA appraisal.

A

B

But the loan will be based on the lower appraisal value and the borrower must pay the difference in cash.

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9
Q
  1. Where a seller is relieved of all obligations under a mortgage which the buyer is assuming, this would be best described as which of the following?

(A) Subordination.
(B) Novation.
(C) Acceleration
(D) Subrogation.

A

B

A novation is a substitution of new parties for the original parties to a contract.

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10
Q
  1. The acceleration clause in a promissory note provides:

(A) payments must be made more frequently at a future specified date
(B) payments may not be made more frequently than specified
(C) upon the happening of a certain event the entire amount of the unpaid balance becomes due.
(D) None of the above.

A

C

Such as default in mortgage payments.

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11
Q
  1. of the following, whose interest is benefited by an acceleration clause in a mortgage note?

(A) The borrower.
(B) The lender.
(C) A ure purchaser upon resale of property. (D) The trustee.

A

B

It allows the lender to demand the total unpaid balance in the event of default.

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12
Q
  1. Which of the following mortgage plans would provide the purchaser with the lowest down payment?

(A) Veterans Administration (VA)
(B) Conventional
(C) Federal Housing Administration (FHA)
(D) Conventional with PMI

A

A

No down payment required for VA loans.

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13
Q
  1. Discount points paid in connection with conventional loans are paid to the:

(A) borrower.
(B) lender.
(C) real estate broker.
(D) seller.

A

B

Points are paid to the mortgagee, not the

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14
Q
  1. Which of the following mortgage plans would provide the homeowner with monthly payments from the mortgagee?

(A) Veterans Administration (VA)
(B) Reverse annuity mortgage.
(C) Federal Housing Administration (FHA) 203B.
(D) Conventional with private mortgage insurance (PMI)

A

B

Designed for older homeowners on fixed incomes, with substantial equity in their home.

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15
Q
  1. When a mortgage is taken over by assumption:

(A) the seller is relieved of responsibility under the mortgage and note
(B) the buyer becomes personally liable for payment of the debt.
(C) the buyer becomes secondarily liable for the debt.
(D) it is referred to as a “novation.”

A

B

The buyer assumes personal liability by taking over the mortgage and the note.

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16
Q
  1. The note, as distinguished from the mortgage, creates:

(A) an obligation to rent.
(B) a personal obligation.
(C) a double obligation.
(D) a lien.

A

B

The note is the primary evidence of the loan and makes the borrower personally liable for the debt.

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17
Q
  1. The money for making Federal Fair Housing Administration (FHA) loans is supplied by:

(A) qualified lending institutions.
(B) the Federal Fair Housing Administration.
(C) a government agency.
(D) the Federal Home Loan Bank.

A

A

The FHA does not lend money, it insures loans.

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18
Q
  1. The interest an owner of property has over and above the mortgage indebtedness is called:

(A) redemption.
(B) equity.
(C) proportionate.
(D) current value.

A

B

things account for equity build-up. debt reduction and property appreciation.

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19
Q
  1. Under a Veterans Administration loan

(A) the veteran can transfer the VA loan to another home.
(B) the veteran can sell the home and allow a nonveteran buyer to assume the loan.
(C) the mortgage may contain a “due on sale” clause.
(D) women are not eligible.

A

B

veteran does not restore his eligibility for a new loan until the old loan is paid off or it is assumed by a veteran buyer who substitutes his eligibility.

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20
Q
  1. A function of the FHA is to:

(A) build housing.
(B) lend money
(C) guarantee loans.
(D) insure loans.

A

D

The FHA does not lend money or b housing. The VA guarantees loans.

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21
Q
  1. A mortgage that covers several parcels of land and that could contain a provision for sale of an individual property, called a release clause, is:

(A) a direct reduction mortgage.
(B) a blanket mortgage.
(C) an amortized mortgage.
(D) a declining balance mortgage.

A

B

Often used by developers

22
Q
  1. Sally Prebble borrowed $50,000. Over the term of the loan she paid $15,000 in interest and then made a final payment of $50,000. Sally’s mortgage can best be described as a

(A) straight mortgage.
(B) blanket mortgage.
(C) open-end mortgage
(D) package mortgage.

A

A

Because the principal was not reduced. only interest was paid. Do not confuse with balloon mortgage, where balance drops.

23
Q
  1. A junior mortgage is:

(A) always a second mortgage
(B) subordinate to mortgages recorded ahead of it.
(C) a mortgage in which the interest rate is subject to periodic renegotiation during its term.
(D) a mortgage given to a minor.

A

B

Not always second; could be third, etc.

24
Q
  1. A second mortgage is:

(A) equal in standing and value with a first mortgage
(B) a junior lien on real estate which has a prior mortgage on it.
(C) always made by the seller.
(D) used in practically all real estate purchases

A

B

Junior lien would be satisfied after the prior lien in the event of foreclosure.

25
Q
  1. A promissory note that provides for payment of interest only during the term of the note would be:

(A) an installment note.
(B) a straight note
(C) an amortized note.
(D) a non-negotiable note.

A

B

No principal reduction during the term of the loan.

26
Q
  1. A buyer agrees to buy a home for $200,000 with a $40,000 down payment, the balance to be financed by a conventional loan. If the seller agrees to pay the discount fee of 2%, how much will he have to pay?

(A) $2,800.
(B) $3,200
(C) $4,000.
(D) $4,200

A

B

$200,000 $40,000 $160,000 x 2% $3.200.

27
Q
  1. Which of the following clauses would N appear in a mortgage?

(A) A subrogation clause
(B) A due on sale clause
(C) An alienation clause.
(D) A defeasance clause

A

A

A subrogation clause is found in an insurance policy

28
Q
  1. “Subject to mortgage” is:

(A) a college course on mortgage finance
(B) a mortgage bought by FNMA and sold to GNMA.
(C) the taking of title to property wherein the grantee is not responsible to the holder of the promissory note for the payment of any portion of the amount due.
(D) the right to foreclose without going to court

A

C

In the event of a deficiency, the lender look only to the seller.

29
Q
  1. A conventional mortgage is:

(A) guaranteed by FHA.
(B) a commercial loan.
(C) approved by the VA.
(D) a two-party transaction.

A

D

The two parties are the lender and borrow er. Government insured or guaranteed loans involve three partie lender, borrow er and a government agency (FHA or VA).

30
Q
  1. The discount charged by a lender and paid by the seller on a federal VA loan is a percent of

(A) sales price.
(B) loan amount.
(C) appraised value.
(D) assessed value.

A

B

Loan called points. Each discount point is 1% of the loan amount.

31
Q
  1. The penalty for complete prepayment of an FHA-insured loan during the first ten years is:

(A) 2% of the face value of the note at time
(B) of payment. remaining 90 days interest on the balance.
(C) 1% of the original amount of the loan.
(D) Nothing.

A

D

Payment penalties are no longer charged with FHA loans.

32
Q
  1. A promissory note:

(A) may not be executed in connection with a loan on real property
(B) is an agreement to do or not to do a certain thing.
(C) is the primary evidence of a loan.
(D) is one which is guaranteed or insured by a governmental agency

A

C

As previously noted.

33
Q
  1. A mortgage is released by:

(A) reversion.
(B) reconveyance.
(C) discounting the loan.
(D) satisfaction.

A

D

Also called “discharge.”

34
Q
  1. A clause in a mortgage or lease, stating that rights of the holders shall be secondary to a subsequent encumbrance, is:

(A) a subordination clause.
(B) a clause.
(C) a subrogation clause.
(D) an inferiority clause.

A

A

The subordination clause permits mortgage recorded at a later date to take priority over an existing mortgage.

35
Q
  1. When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment of the balance is called:

(A) a balloon payment.
(B) an acceleration payment.
(C) a straight payment.
(D) kiting.

A

A

This occurs because the payments were calculated on a longer payment period than the actual term of the loan.

36
Q
  1. When you use real property as security for a loan you:

(A) demise it.
(B) hypothecate it.
(C) assign it.
(D) devise it.

A

B

A hypothecation occurs when property is pledged as the security for a loan, and the borrower retains possession of the pledged property

37
Q
  1. All but one of the following is a purpose of FHA:

(A) Insure titles.
(B) Stabilize the mortgage market.
(C) Encourage improvement in housing standards
(D) Encourage home financing

A

A

Title companies insure titles. The FHA insures mortgage payments.

38
Q
  1. Upon the completion of a sale of mortgaged property, the seller must:

(A) pay off the mortgage.
(B) deliver the deed to the grantee
(C) record the satisfaction of the mortgage.
(D) inform the Department of Banking.

A

B

If the buyer assumes the mortgage, it would not be paid off and a satisfaction would not be recorded

39
Q
  1. Conventional loans are:

(A) guaranteed by the federal government
(B) insured by the federal government
(C) not originated as often as FHA and VA loans.
(D) loans that are not guaranteed or insured by any agency of the federal government.

A

D

Only two parties are involved - lender and borrower.

40
Q
  1. The Veterans Administration is authorized to make direct loans where:

(A) the veteran agrees not to occupy the property
(B) a disabled veteran gets a supplemental grant to get a specially adapted home.
(C) veteran has trouble qualifying for the loan.
(D) the FHA refuses to insure the loan.

A

B

The VA would not make a loan to an unqualified borrower

41
Q
  1. When a loan is approved by FHA

(A) the appraised value may be less than the sale price.
(B) the government guarantees the value of the property
(C) the FHA lends the money
(D) the Director of HUD sets the maximum interest rate.

A

A

FHA insures the loan. Interest rates are the determined by the market, not by HUD.

42
Q
  1. Which of the following federal agencies does NOT participate in the secondary mortgage market?

(A) FHA
(B) FNMA
(C) GNMA
(D) FHLMC

A

A

The VA and FHA guarantee and insure loans but do not engage in the secondary market

43
Q
  1. The agency of the Department of HUD that buys and sells low-income mortgages is:

(A) Federal Deposit Insurance Corp.
(B) Ginnie Mae.
(C) Federal Home Savings and Loan.
(D) Mutual Mortgage Insurance Corp.

A

B

such as urban renewal projects and housing for the elderly.

44
Q
  1. Which of the following conveys legal title and possession?

(A) deed
(B) mortgage
(C) purchase and sale agreement
(D) option

A

A

A purchase and sale agreement conveys equitable title

45
Q
  1. A financing arrangement by which the buyer does not become the owner of record would be a

(A) trust deed.
(B) land contract.
(C) purchase money mortgage.
(D) quitclaim deed.

A

B

Buyer does not get title until last payment is made. Can also be used to purchase improved real estate

46
Q
  1. The Seller under a land contract is called the

(A) grantor.
(B) grantee.
(C) vendor.
(D) vendee.

A

C

Seller is identified as vendor in contract, grantor in deed.

47
Q
  1. The Federal National Mortgage Association (Fannie Mae):

(A) insures FHA loans
(B) guarantees VA loans.
(C) buys and sells mortgages.
(D) originates loans to home buyers.

A

C

Fannie Mae buys and sells mortgages, it does not originate loans.

48
Q
  1. Under a sale-leaseback, the occupant of the property would be which of the following?

(A) buyer
(B) seller
(C) grantee
(D) mortgagee

A

B

The seller becomes the lessee (tenant).

49
Q
  1. A private corporation which purchases mortgages in the secondary mortgage market is called:

(A) Government National Mortgage Association.
(B) Federal Home Loan Corporation.
(C) Federal National Mortgage Association.
(D) Federal Home Loan Mortgage Association.

A

C

Created as a government agency in 1938; privatized in 1968 things.

50
Q
  1. A land contract does not give the buyer:

(A) the right to live on the property
(B) the right to lease the property.
(C) the right of possession.
(D) legal right to the property

A

D

The buyer can do all of the other things

51
Q
  1. Redlining” is

(A) refusal by a lender to make loans in minority populated areas and is legal
(B) refusal by a lender to make loans to unqualified buyers.
(C) refusal by a lender to make loans in minority populated areas and is unlawful.
(D) lending more than the market value of the property

A

C

A violation of federal and state laws.

52
Q
  1. Which of the following would constitute mortgage fraud?

(A) Applying for a residential loan for an investment property
(B) An appraiser acts in collusion with a borrower and provides misleading appraisals to the lender.
(C) The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage
(D) All of the above.

A

D

All these activities are fraudulent.

Real Estate (NJ) (30 decks)

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