chapter 14 quiz

Question 1

a promissory note is:

Answer 1

the lender’s evidence of a loan

Question 2

two different legal positions have developed regarding the lender’s rights in property, where a mortgage has been given as security for a debt. some states practice the lien theory of mortgage law while others follow the title theory. the difference is that:

Answer 2

in a lien theory states, the lender has only a monetary claim to the property.

Question 3

Nelson sells his home to Randall subject to an existing first mortgage loan he obtained 5years ago. after nine months, Randall can no longer continue to make the monthly payments. under these circumstances:

Answer 3

the purchaser has no liability to the lender.

Question 4

When a lender’s security instrument includes the power of sale and a borrower has failed to make payments on a loan with that lender, which of the following is true?

Answer 4

the lender is required to advertise before holding a foreclosure sale.

Question 5

negative amortization is a loan feature which:

Answer 5

allows the principal balance to increase because payments are insufficient to pay the interest owed.

Question 6

the cost of the FHA mortgage insurance is charge to:

Answer 6

the borrower

Question 7

a loan discount is:

Answer 7

prepaid interest collected by the lender

Question 8

in order to determine exactly what portion of a mortgage loan the VA will guarantee on behalf of a qualified veteran, the veteran must apply for a :

Answer 8

certificate of eligibility: to indicate the recipient’s ability to get a home loan guaranteed by the agency.

Question 9

in Georgia, the use of a security deed:

Answer 9

authorizes the grantee to conduct the foreclosure according to the provisions of the power of sale clause.

Question 10

a borrower will probably be asked to pay for mortgage insurance when arranging a conventional loan on a residential property when the loan amount will be………..% of the loan-to-value ratio?

Answer 10

over 80%

page 312 in dictionary

Question 11

the developer of low-income housing would most likely arrange financing subsidized by:

Answer 11

GNMA (GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNIE MAE)).

Question 12

denying a loan to a qualified borrower entirely on the basis of the particular neighborhood involved:

Answer 12

is a form of discrimination called redlining

Question 13

Mason and gilbert sign a promissory note jointly and severally to borrow $100,000 to finance the purchase of a property they will own equally. if Mason defaults, then:

Answer 13

Gilbert is responsible for the entire debt.

Question 14

when included in a loan agreement, this clause allows the lender to demand the entire loan balance due when title is transferred.

Answer 14

Alienation clause

Question 15

which of the following would be included in a mortgage, if used in a lien theory state?

Answer 15

Mortgaging clause : in lien theory state, this provision gives the lender a lien in the property pledge as security

Question 16

by including an exculpatory clause, in a mortgage contract, the lender:

Answer 16

releases the borrower from personal liability.

Question 17

regarding the impounds a borrower might be required to pay to the lender, which of the following is true?

Answer 17

the Real Estate Settlement Procedures Act (RESPA) regulates the amount lenders can collect for impounds

Question 18

to clarify the lending process and educate the consumer, the CFPB combined the duplicate disclosures required in which two laws?

Answer 18

REAL ESTATE SETTLEMETN PROCEDURES ACT and TRUTH IN LENDING ACT

Question 19

all of the following are true of an FHA insured loan EXCEPT:

Answer 19

the loan is freely assumable by an investor as long as he has been qualified by the lender

• a prepayment penalty is not permitted
• if the property does not appraise for the full sales price, the buyer may rescind without penalty.
• both upfront and annual MIP will be required.

Question 20

the disclosure of the ARP is required by:

Answer 20

TILA ( Truth In Lending Act) (regulation Z): a federal regulation, known as truth in lending, requiring creditors to provide full disclosure of the terms of a loan.
*(pretty much describing to the borrower what will happened if he fails to pay the loans)

Question 21

which of the following characteristics apply to VA guaranteed loans?

Answer 21

spouses of veterans killed in the line of duty, who have not remarried, are eligible for a VA loans.

Question 22

before making a mortgage loan, a lender will be concerned with all of the following EXCEPT:

Answer 22

if the borrower is male or female

• credit worthiness of the borrower.
• present and potential future value of the property.
• the borrower’s need for financial assistance with the down payment.

Question 23

a phenomenon which adversely affects thrift institutions when investment alternatives are more attractive to depositors is called:

Answer 23

disintermediation: situation when deposits are removed from a financial intermediary, such as a savings and loan association, and invested in other assets, generally for the purpose of obtaining higher yields.

Question 24

a type of mortgage loan which provides for payment of interest only during its term is:

Answer 24

a straight loan: In a term or straight loan, the payments made only include interest. In other words, it is nonamortized, which means none of the money paid went towards the principal. Making payments can be done on a periodic basis, such as monthly, quarterly or annually.

Question 25

when a trust deed is used to pledge real property as security for a loan, the lender is the:

Answer 25

beneficiary: the person who receives or is to receive the benefits resulting from certain acts.