Chapter 12: Real Estate Finance (MC)

Question 1

The legal instrument evidences the debt and states the interest rate, term, payment requirement and other information related to the loan is the

a. promissory note.
b. contract.
c. lien.
d. mortgage.

Answer 1

a. promissory note.

Question 2

A mortgage

a. conveys title to real property.
b. secures the repayment of the debt.
c. created a personal pledge to repay a loan.
d. creates a lien on the mortgagee’s property.

Answer 2

b. secures the repayment of the debt.

Question 3

When financing the purchase of real estate, the mortgagor

a. gives a mortgage to the mortgagee.
b. takes a mortgage from a mortgagee.
c. gives a mortgage to a borrower.
d. takes a mortgage from a lender.

Answer 3

a. gives a mortgage to the mortgagee.

Question 4

Which clause in a mortgage requires the lender to acknowledge performance by the borrower?

a. estoppel
b. acceleration
c. defeasance
d. release

Answer 4

c. defeasance

Question 5

In order to qualify for a FHA 203b insured mortgage loan, an applicant’s housing expense ratio cannot exceed

a. 25%
b. 28%
c. 31%
d. 43%

Answer 5

c. 31%

Question 6

The party that holds title to real property in a lien theory state is the

a. trustee.
b. mortgagor.
c. mortgagee.
d. beneficiary.

Answer 6

b. mortgagor.

Question 7

A receivership clause in a mortgage

a. is used to protect the value of property during the foreclosure process.
b. conveys ownership to mortgaged property to the rightful heirs of a decedent.
c. allows an owner to charge rent when a property is mortgaged.
d. specifies the party entitled to ownership of mortgaged property when a loan has been fully paid.

Answer 7

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

Question 8

The right of a mortgagor in default to pay all money owed and prevent the sale of property at foreclosure is called the equity of

a. redemption.
b. estoppel.
c. defeasance.
d. release.

Answer 8

a. redemption.

Question 9

Discount points

a. subsidize the purchase of homes by low-income borrowers.
b. increase the lender’s yield.
c. stop disintermediation.
d. decrease the lender’s yield.

Answer 9

b. increase the lender’s yield.

Question 10

The two ratios under which a borrower must quality in order to receive a FHA insured mortgage loan are the

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.

Answer 10

b. housing expense and total monthly obligations ratios.

Question 11

The process used by loan underwriters to determine if applicants are satisfactory credit risks is called

a. servicing.
b. brokering.
c. qualifying.
d. leveraging.

Answer 11

c. qualifying.

Question 12

Two discount points on a 7% loan increase the effective rate of interest on the loan to approximately

a. 7 1/8%
b. 7 1/4%
c. 7 1/2%
d. 7 3/4%

Answer 12

b. 7 1/4%

Question 13

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

Answer 13

c. subject to

Question 14

Funds remaining after all liens have been paid following a foreclosure sale belonging to the

a. sheriff of the county in which the property is located.
b. clerk of the circuit court.
c. mortgagor.
d. mortgagee.

Answer 14

c. mortgagor.

Question 15

The Real Estate Settlement Procedures Act (RESPA) does NOT require

a. disclosure of a good faith estimate of closing costs.
b. use of the HUD-1 settlement statement form at closing
c. receipt by a borrower of a booklet entitled “Settlement Costs and You.”
d. disclosure of the annual percentage rate (APR)

Answer 15

d. disclosure of the annual percentage rate (APR)