CHAPTER 12 Flashcards
Which legal instrument evidences the debt
and states the interest rate, term, payment
requirement, and other information related
to the loan?
a. Promissory note
b. Contract
c. Lien
d. Mortgage
a. Promissory note
What is the function of a mortgage? a. It conveys title to real property. b. It secures the repayment of the debt. c. It creates a personal pledge to repay a loan. d. It creates a lien on the mortgagee’s property.
b. It secures the repayment of the debt.
When financing the purchase of real estate, what is the role of the mortgagor? a. A mortgagor gives a mortgage to a mortgagee. b. A mortgagor takes a mortgage from a mortgagee. c. A mortgagor gives a mortgage to a borrower. d. A mortgagor takes a mortgage from a lender.
a. A mortgagor gives a mortgage to a
mortgagee.
Which clause in a mortgage requires the lender to acknowledge performance by the borrower? a. Estoppel b. Acceleration c. Defeasance d. Release
c. Defeasance
In order to qualify for an FHA 203b insured mortgage loan, an applicant’s housing expense ratio cannot exceed what percentage? a. 25% b. 28% c. 31% d. 43%
c. 31%
Which statement best describes a short
sale?
a. A real estate transaction that closes in
under 30 days
b. A settlement agreement where the lender
agrees to a sales price that is below the
outstanding loan balance
c. A real estate transaction where the seller
agrees to assist the buyer by taking a
second mortgage
d. A transaction that does not close due to a
buyer’s shortage of funds at closing
b. A settlement agreement where the lender
agrees to a sales price that is below the
outstanding loan balance
What is the purpose of a receivership clause in a mortgage?
It is used to protect the value of the
investment property during the foreclosure
process.
Which term refers to the right of a mortgagor in default to pay all money owed and prevent the sale of the property at foreclosure?
a. Equity of redemption
b. Estoppel
c. Defeasance
d. Right of release
a. Equity of redemption
What is the primary purpose of discount points? a. To subsidize the purchase of homes by low-income borrowers b. T o decrease the monthly payment required c. T o stop disintermediation d. To decrease the lender’s yield
b. T o 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? a. Housing expense and monthly gross income ratios b. Housing expense and total monthly obligations ratios c. Gross income and total obligations ratios d. Housing expense net ratio and total monthly obligations net ratio
b. Housing expense and total monthly
obligations ratios
What process is used by loan underwriters to determine if applicants are satisfactory credit risks?
Qualifying
A borrower is consistently late on their mortgage payments, so the bank exercises its right to raise the interest rate. Which clause in the mortgage document allows the lender to do this? d.
a. Default Rate Mortgage Clause
b. Escalation Clause
c. Late Payment Clause
d. Due-on-Sale Clause
b. Escalation Clause
How was title taken if a seller remained solely liable for the balance of a mortgage loan subsequent to transfer of ownership?
a. Novation
b. Assumption
c. Subject to
d. Agreement for deed
c. Subject to
After all liens have been paid following a foreclosure sale, to whom do any remaining funds belong?
c. The mortgagor
Which mortgage clause is the borrower’s promise to pay the property taxes during the period of the loan?
Tax
The instrument that contains the amount of the loan, interest rate, payment provisions, and other terms of the loan is the ________________ _______________.
promissory note
A mortgage is a _______________ _______________ _______________.
Pledge of security
The clause in a mortgage that protects the borrower’s interest and requires the lender to
acknowledge performance by the borrower is the _______________ clause.
Defeasance
The clause that allows a parcel of property to be sold free and clear of a blanket mortgage is the
_________________ clause.
release clause
A ____________ _____________ is a written agreement in which a lender agrees with the property
owner to change the priority of liens.
subordination agreement
If a borrower was in default, and the lender wished to call the entire balance of the loan due and
payable, the mortgage would have to contain a(n) __________________ clause.
acceleration clause
- If a buyer were to take over the balance of an existing mortgage in such a way that the seller remained solely responsible for a deficiency judgment, the property was sold ________________ _______________ _______________ ______________.
subject to the mortgage
- When a lender allows a new borrower to take responsibility for a mortgage and note, and releases the original borrower from liability for the mortgage and note, the process is called ______________ ______________ ______________.
assumption with Novation
- When a lender is requested by a borrower to verify the outstanding balance of a loan, the lender would give the borrower a(n) _______________ _______________.
estoppel letter
- The percentage figure borrowers must be provided with that includes all costs associated with a loan is referred to as the _______________.
APR
- A _______________ ________________ is a personal debt based on the promissory note.
deficiency judgement
- The right of a borrower to cure a default prior to foreclosure is called the _______________
__________ ________________.
equity of redemption
- Foreclosure is _______________ of the mortgage.
enforcement
- A _______________ _______________ is the primary claim on a property which takes precedence over all other subsequent (junior) mortgage claims.
first mortgage
- _______________ is the difference between the current market value of a property and the amount the owner still owes on the mortgage.
equity
