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REAL ESTATE CH 12 > CHAPTER 12 > Flashcards

CHAPTER 12 Flashcards

1
Q

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

a. Promissory note

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2
Q 
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.
A

b. It secures the repayment of the debt.

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3
Q 
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. A mortgagor gives a mortgage to a

mortgagee.

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4
Q 
Which clause in a mortgage requires the
lender to acknowledge performance by the
borrower?
a. Estoppel
b. Acceleration
c. Defeasance
d. Release
A

c. Defeasance

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5
Q 
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%
A

c. 31%

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6
Q

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

A

b. A settlement agreement where the lender
agrees to a sales price that is below the
outstanding loan balance

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7
Q

What is the purpose of a receivership clause in a mortgage?

A

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

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8
Q

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

a. Equity of redemption

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9
Q 
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
A

b. T o decrease the monthly payment

required

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10
Q 
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
A

b. Housing expense and total monthly

obligations ratios

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11
Q

What process is used by loan underwriters to determine if applicants are satisfactory credit risks?

A

Qualifying

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12
Q

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

A

b. Escalation Clause

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13
Q

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

A

c. Subject to

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14
Q

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

A

c. The mortgagor

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15
Q

Which mortgage clause is the borrower’s promise to pay the property taxes during the period of the loan?

A

Tax

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16
Q

The instrument that contains the amount of the loan, interest rate, payment provisions, and other terms of the loan is the ________________ _______________.

A

promissory note

17
Q

A mortgage is a _______________ _______________ _______________.

A

Pledge of security

18
Q

The clause in a mortgage that protects the borrower’s interest and requires the lender to
acknowledge performance by the borrower is the _______________ clause.

A

Defeasance

19
Q

The clause that allows a parcel of property to be sold free and clear of a blanket mortgage is the
_________________ clause.

A

release clause

20
Q

A ____________ _____________ is a written agreement in which a lender agrees with the property
owner to change the priority of liens.

A

subordination agreement

21
Q

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.

A

acceleration clause

22
Q
  1. 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 ________________ _______________ _______________ ______________.
A

subject to the mortgage

23
Q
  1. 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 ______________ ______________ ______________.
A

assumption with Novation

24
Q
  1. When a lender is requested by a borrower to verify the outstanding balance of a loan, the lender would give the borrower a(n) _______________ _______________.
A

estoppel letter

25
Q
  1. The percentage figure borrowers must be provided with that includes all costs associated with a loan is referred to as the _______________.
A

APR

26
Q
  1. A _______________ ________________ is a personal debt based on the promissory note.
A

deficiency judgement

27
Q
  1. The right of a borrower to cure a default prior to foreclosure is called the _______________
    __________ ________________.
A

equity of redemption

28
Q
  1. Foreclosure is _______________ of the mortgage.
A

enforcement

29
Q
  1. A _______________ _______________ is the primary claim on a property which takes precedence over all other subsequent (junior) mortgage claims.
A

first mortgage

30
Q
  1. _______________ is the difference between the current market value of a property and the amount the owner still owes on the mortgage.
A

equity

REAL ESTATE CH 12 (2 decks)

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