Chapter 12

Question 0

A mortgage is?

Answer 0

Pledge of security

Question 1

Allows the borrower to retain the ownership of the property during the loan period. The borrower is given the right to cure the default instead of simply forfeiting the property

Answer 1

Lien theory

Question 2

Requires taxes to be paid during the period of the loan, failure to pay could be sold in tax foreclosure.

Answer 2

Tax clause

Question 3

The right that allows a borrower to redeem from a foreclosure for a period of time after a foreclosure sale

Answer 3

Statutory right of redemption

Question 4

Enforcement of a mortgage lien by a lender is a

Answer 4

Foreclosure

Question 5

Three types of mortgages

Answer 5

FHA, VA, and conventional

Question 6

Promissory note?

Answer 6

When money is borrowed to purchase real estate, the lender requires the borrower to sing a note or bond

Question 6

Insurance clause

Answer 6

Mortgages typically require the borrower to carry fire and hazard insurance in an amount at least equal to the unpaid balance of the loan.

Question 7

Tax clause

Answer 7

Lender requires the taxes to be paid during the period of the loan. Should the borrower fail to pay the taxes as required, the would end up in a tax foreclosure sale, which would remove the lien created by recording the mortgage.

Question 8

Provides protection for the mortgagor as it requires the lender to acknowledge performance by the borrower.

Answer 8

Defeasance clause

Question 9

Allows the lender to declare the entire outstanding balance immediately due and payable whenever default occurs, instead of doing month after month.

Answer 9

Acceleration clause

Question 10

Prevents a borrower from transferring any interest in the mortgaged property without permission of the lender.

Answer 10

Alienation clause

Question 11

Allows a borrower to borrow additional funds based on the same mortgage after the loan balance has been paid down.

Answer 11

Open end clause

Question 12

Allows a lender to increase the interest rate based on the occurrence of an event, such as a change in the use of the property.

Answer 12

Escalator clause

Question 13

Limits the lenders rights in a foreclosure to the amount received from the sale of the foreclosure property. The lender cannot obtain a deficiency judgement for the unsatisfied amount.

Answer 13

Exculpatory clause

Question 14

Release clause

Answer 14

Is found in mortgages that cover more than one parcel of land, usually those given by builders and developers. Buyer can’t sell lot of the buyer can’t get a mortgage loan. To resolve, release is used to release an individual lot from original loan for construction.

Question 15

Gives lender the right to foreclose at its option by requiring a borrower to admit any future default at the time a loan is obtained.

Answer 15

Cognovit clause

Question 16

The borrower must pay the entire balance of the debt plus interest and costs that have accrued since the default

Answer 16

Equity of redemption

Question 17

Statutory right of redemption

Answer 17

Allows a borrower to redeem from a foreclosure for a period of time after foreclosure sale.

Question 18

Gives a borrower the right to cure a loan that is in default by paying loan payments that are in arrears, along with accrued interest, late payment charges, and legal costs incurred by the lender.

Answer 18

Right to reinstate

Question 19

Real estate settlement procedure act (RESPA)

Answer 19

Requiring lender to provide good faith estimates of settlement costs no later than 3 business days following the date of mortgage application

Requiring uniform settlement statement HUD 1 be completed 1 day prior to closing

Question 20

Truth in lending act

Answer 20

Enacted to assure that consumers receive meaningful information concerning the true cost of credit. Consumer credit protection