Chapter 8 Flashcards
The spread between the interest rate on an underlying loan and the all-inclusive trust deed (AITD) note is called:
a. margin.
b. effective yield.
c. balance of the purchase price.
d. overriding interest rate.
D
The _______________ on a seller’s equity in an all-inclusive trust deed (AITD) is calculated using the principal amount of the underlying mortgage, the equity amount on the AITD and the interest rate spread between these two mortgages.
a. operating income
b. net annual interest income
c. shrinking AITD equity
d. effective yield
D
A seller’s ______________ is the total of the interest earned on an all-inclusive trust deed (AITD) minus all interest expenses incurred on a wrapped mortgage.
a. net annual interest income
b. effective rate of return
c. default interest rate
d. lower-than-market interest rate
A
Under a(n) ______________, payments start low and adjust upward to maintain the original amortization period.
a. negative amortization schedule
b. graduated payment mortgage
c. reverse rate of return
d. override spread
B
The all-inclusive trust deed (AITD) carryback seller agreeing to wrap a first mortgage containing a due-on clause needs to anticipate the mortgage holder’s demand to recast their note by increasing or moving up:
a. the interest rate.
b. the due date.
c. the payment amounts.
d. All of the above.
D
Alternative documentation for a carryback sale which introduces creative chaos into a transaction includes:
a. unexecuted or open-ended purchase agreements with interim occupancy.
b. land sales contracts.
c. lease-option sales contracts.
d. All of the above.
D
________________ were widely used from the late 1960s to the late 1970s as the preferred method for avoiding due-on enforcement by mortgage holders.
a. Equitable conversions
b. Contract escrows
c. Land sales contracts
d. Lease-option sales
C
Even if a land sales contract document is not recorded, entering into a land sales contract triggers:
a. the due-on clause in an existing trust deed as a transfer of an interest.
b. reassessment for property tax purposes as a change of ownership.
c. Both a. and b.
d. Neither a. nor b.
C
When a purchase agreement contains a provision for the transfer of possession and buildup of equity by a credit to the purchase price for a portion of the buyer’s payments to the seller, this is referred to as a(n):
a. lease-purchase sale.
b. unexecuted purchase agreement.
c. contract escrow.
d. All of the above.
A
When a formal sales escrow is not used to handle documents and funds on a reverse trust deed transaction, the person arranging the sale is required to report the transaction to the Internal Revenue Service (IRS) on a(n):
a. IRS 1099-S form.
b. IRS 1031 form.
c. CalBRE 251 form.
d. FNMA 1003 form.
A
