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Fundamentals of Real Estate > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

What is a default judgment?

A

Answer: The homeowner failed to catch up on the loan payments, and the court ruled against the homeowner.

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2
Q

In a non-judicial foreclosure, is there a right to redeem?

A

Answer: This happens only in some states. State law outlines this right.

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3
Q

What is a deed in lieu of foreclosure?

A

Answer: The homeowner asks the lender to accept the deed on a home to stop the foreclosure process and walks away from the home.

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4
Q

Your buyer wants to list a home as a short sale. What is your obligation?

A

Answer: You can list it, but recognize that the lender must approve the process.

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5
Q

In a lien theory state, who services as the mortgagee?

A

Answer: The lender

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6
Q

What is the benefit of mortgage-backed securities to a home buyer?

A

Answer: With mortgage-backed securities, lenders sell loans in packages across the country, making it possible for borrowers in low-income areas to qualify for loans.

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7
Q

When asked why the Fed is raising rates, what is your answer?

A

Answer: The Federal Reserve increases rates to grow profits, but also to control inflation and build the economy.

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8
Q

Jake says he’s not worried about making payments on time. Why should he avoid late payments?

A

Answer: Mortgages are backed by the value of the property, allowing the lender to foreclose, take possession of the property, and force the buyer out.

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9
Q

Interest rates are the cost to borrow money to buy a home. What is the percentage?

A

Answer: The fee charged by the lender to borrow funds.

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10
Q

Zach needs to lower his monthly payment to feel comfortable buying a home. How can discount points help?

A

Answer: Paying interest upfront in the form of points will reduce the monthly payment.

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11
Q

Bob wants to buy a home, but plans to pay it off early. Can he do so without risk?

A

Answer: Sometimes, but some loans have prepayment clauses that can create a fee.

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12
Q

Danielle says she is using an unsecured loan to buy a home. Is she wrong?

A

Answer: Yes, nearly all home loans are secured loans.

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13
Q

What role does a trustee play in a title theory state?

A

Answer: The trustee holds the interest in the home, or the legal title.

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14
Q

Does a homeowner always maintain legal title for a home?

A

Answer: No, in title theory states, the trustee maintains it until the debt is paid in full.

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15
Q

Justin is behind on the mortgage in a lien title state. What happens?

A

Answer: The lender can take legal steps to foreclose on the loan.

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16
Q

Does the mortgagor do more than promise to pay the monthly payment?

A

Answer: Yes, he must meet all duties outlined in the mortgage document.

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17
Q

Christopher’s home was lost in foreclose, but no one bought it. Who gets ownership?

A

Answer: The mortgagee has the right to take possession as a REO.

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18
Q

Courtney can’t pay her mortgage. Her friend can just take over on the payments, right?

A

Answer: No, the lender must approve the reassigning of the loan debt to another person.

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19
Q

What is the alienation clause in a mortgage?

A

Answer: It gives the lender the right to payment in full when the property is sold.

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20
Q

Lauren is thinking about renting her home out. Is she allowed to do so?

A

Answer: Only if there is an Assignment of Rent clause and the lender approves.

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21
Q

Jamie wants to buy a duplex and rent the second half to a friend. Will her lender allow it?

A

Answer: An Assignment of Rent allows for this at the time of securing the loan.

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22
Q

Robert is moving, but doesn’t want to sell the home. Can his friend Jerrell take over the loan?

A

Answer: Robert must get approval from the lender for the Assumption Clause.

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23
Q

Stan has not maintained his home. The city is after him. Will his lender care?

A

Answer: Yes, the mortgagor must maintain the quality and value of the home to maintain the loan.

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24
Q

Jack says he wants to purchase a home but doesn’t want to haggle with the banks. He wants you, his real estate agent, to help him get a loan. What should you do now?

A

Answer: Point to a member of the primary mortgage market, such as a local bank or mortgage broker.

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25
Q

Who is the trustor in a deed of trust?

A

Answer: The home buyer.

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26
Q

Tristan is defaulting on his loan. Who handles the process in a deed of trust?

A

Answer: The trustee.

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27
Q

Samantha wants to know if she lives in a deed of trust state. How do you find out?

A

Answer: Her lender will know, but any title company can clarify this

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28
Q

What happens in a non-judicial foreclosure?

A

Answer: The trustee moves to force the sale of the home due to default on the loan.

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29
Q

Is the court involved in non-judicial foreclosure?

A

Answer: No, it is handled outside of the court system.

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30
Q

Kevin receives notice of an auction on his home. Can the trustee sell the home this fast?

A

Answer: Though most give at least 30 days of notice, a trustee can list the home for sale as soon as one missed payment.

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31
Q

As a real estate agent, can you help with foreclosures?

A

Answer: You may be able to help a borrower sell a home faster to avoid a foreclosure, but you don’t negotiate loan terms.

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32
Q

What is recorded by the county in a real estate transaction?

A

Answer: Mortgages and title transfers are documented, but promissory notes are not.

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33
Q

Julie lost her home in foreclosure. Who has priority over the value of the home?

A

Answer: This is outlined in the priority of liens component of the mortgage and recording.

34
Q

Who is the typical first priority lien holder on a mortgage?

A

Answer: The lender generally is the first priority and is repaid first out of the sale price.

35
Q

Angela wants to buy a home with an existing tax lien. What should she does

A

Answer: The tax lien must be settled first, and in some cases, the buyer will pay these off to clear the title.

36
Q

Roger is selling his home and has $50,000 worth of equity. What happens to this value?

A

Answer: After the home loan is paid off, the remaining sale value is paid to Roger.

37
Q

What is a federally backed loan program?

A

Answer: Programs like FHA and VA loans, which help borrowers avoid default and help them get into low-interest loans.

38
Q

What is foreclosure in basic terms?

A

Answer: A borrower defaults on a loan, causing the lender to force the sale of the property to free up its investment.

39
Q

Sally wants to do whatever it takes to avoid foreclosure. What can you tell her?

A

Answer: Ensure you are well qualified for the loan before entering into it.

40
Q

April is worried about facing foreclosure. What’s the first sign the lender is taking action?

A

Answer: The lender will send a notice to the borrower informing them of their intent to foreclose.

41
Q

What is a default judgment?

A

Answer: The homeowner failed to catch up on the loan payments, and the court ruled against the homeowner.

42
Q

What will happen to a homeowner in the event of a non-judicial foreclosure?

A

Answer: The trustee involved will sell the home at an auction. The home may revert back to the lender if no buyer is found.

43
Q

What is a deed in lieu of foreclosure?

A

Answer: The homeowner asks the lender to accept the deed on a home to stop the foreclosure process and walks away from the home.

44
Q

Linda wants to sell her home to avoid foreclosure, but can’t get enough on the market to do so. Can she still sell?

A

Answer: The lender may approve a short sale, depending on the circumstances.

45
Q

Tim lost his home in a foreclosure and received a deficiency judgment. What is it?

A

Answer: An obligation to pay the remaining owed debt after the home is sold but is sold for less than the loan owed.

46
Q

Amy says she has an interest rate of 5%. Where is this located in her loan documents?

A

Answer: The promissory note lists the interest rate, or cost to borrow the funds

47
Q

What happens if Susan doesn’t pay according to the terms of her promissory note?\

A

Answer: The loan defaults, she can be sued in court, and the home may be sold

48
Q

What role does the Federal Reserve play in the real estate mortgage industry?

A

Answer: It creates rules to govern the industry.

49
Q

What is a secured loan?

A

Answer: A loan backed by some type of collateral, usually the value of the home itself.

50
Q

What’s a usury law?

A

Answer: A law that limits how much interest banks can charge.

51
Q

Mike wants to lower the interest rate on his mortgage. He wants to pay 1 point in interest. How much is this?

A

Answer: One point is one percent of the borrowed amount.

52
Q

Zach needs to lower his monthly payment to feel comfortable buying a home. How can discount points help?

A

Answer: Paying interest upfront in the form of points will reduce the monthly payment.

53
Q

Bob wants to buy a home, but plans to pay it off early. Can he do so without risk?

A

Answer: Sometimes, but some loans have prepayment clauses that can create a fee.

54
Q

Oscar isn’t planning to live in his home for long before he moves. Is a straight loan a good option?

A

Answer: Yes, he will pay less in the early term and can sell the home to pay off the remaining amount later.

55
Q

Max is selling his home to avoid the acceleration clause from impacting him. What’s that?

A

Answer: The lender is requiring payment in full due to a breach in the contract.

56
Q

What is a lien theory state?

A

Answer: The homeowner holds the deed for the property throughout the entire loan.

57
Q

Amy wants to purchase a home, but she feels the banks are not being fair. As she sits across from you at your desk, she talks about just how good she is about paying her debts on time and that she has a solid credit score. But, she can’t get the lowest interest rate available. Amy has read that the Fed has reduced key lending rates to .25%, and she wants to know why lenders are charging her 4 to 5%. That’s thousands of dollars more over the course of the loan. Why is Amy being charged more?

A

Answer: The Fed sets a key lending rate shared only between banks, which sets the tone for, but is not the rate borrowers pay.

58
Q

Sue wants to tear down a portion of her home. Does she need to ask her lender?

A

Answer: Yes, significant changes must be reported to the mortgagee.

59
Q

How many missed payments does it take for the lender to send a notice of default?

A

Answer: As few as one, but this depends on the state’s laws.

60
Q

Dory thinks she can skip a payment this month as long as she makes it up next month. Is that okay?

A

Answer: No, though lenders can offer a grace period for catching up, they don’t have to.

61
Q

What’s the most common cause of default by homeowners?

A

Answer: Not making on-time payments.

62
Q

Abigail paid off her loan in full. What happens with her title?

A

Answer: She receives the title as a result of the Satisfaction of Mortgage.

63
Q

When is the mortgage recorded?

A

Answer: After all documents are signed at the closing and the title company transfers the title.

64
Q

Stan has not maintained his home. The city is after him. Will his lender care?

A

Answer: Yes, the mortgagor must maintain the quality and value of the home to maintain the loan.

65
Q

Who is the mortgagee in a mortgage contract?

A

Answer: The lender.

66
Q

Samantha wants to know if she lives in a deed of trust state. How do you find out?

A

Answer: Her lender will know, but any title company can clarify this.

67
Q

Aside from interest rate fees, how do lenders in the primary mortgage market profit from the home buying process?

A

Answer: The loans they create are packaged and sold in bundles as securities.

68
Q

Cameron believes a non-judicial foreclosure is best for her as a homeowner. Is that the case?

A

Answer: Non-judicial foreclosures favor the lender because of how inexpensive and fast they are.

69
Q

Kevin receives notice of an auction on his home. Can the trustee sell the home this fast?

A

Answer: Though most give at least 30 days of notice, a trustee can list the home for sale as soon as one missed payment.

70
Q

Olivia loses her home in an auction. But, she’s able to catch up now. Can she do so?

A

Answer: Some states allow the homeowner to redeem the foreclosed sale for a limited amount of time after the auction.

71
Q

When will Shawn have to leave his home after an auction from default?

A

Answer: Immediately. There’s little time afforded to the defaulted buyer.

72
Q

Sam heard that buying a home was least expensive if he bought through Fannie Mae. Sam wants to invest in a loan that’s least expensive to him, and this government-backed program seems to be a good option. Can Sam borrow from Fannie Mae?

A

Answer: No, Fannie Mae is a publicly traded organization. It does not lend directly.

73
Q

Angela wants to buy a home with an existing tax lien. What should she do?

A

Answer: The tax lien must be settled first, and in some cases, the buyer will pay these off to clear the title.

74
Q

Roger is selling his home and has $50,000 worth of equity. What happens to this value?

A

Answer: After the home loan is paid off, the remaining sale value is paid to Roger.

75
Q

Amanda’s home equity lender is going through the subordinate process. What does that mean?

A

Answer: This lender wants to take priority over other lenders in the event of a foreclosure.

76
Q

What is a federally backed loan program?

A

Answer: Programs like FHA and VA loans, which help borrowers avoid default and help them get into low-interest loans.

77
Q

What is foreclosure in basic terms?

A

Answer: A borrower defaults on a loan, causing the lender to force the sale of the property to free up its investment.

78
Q

What does a judicial foreclosure involve?

A

Answer: The court system

79
Q

What does a non-judicial foreclosure involve?

A

Answer: The borrower, lender, and trustee without the court system.

80
Q

April is worried about facing foreclosure. What’s the first sign the lender is taking action?

A

Answer: The lender will send a notice to the borrower informing them of their intent to foreclose.

Fundamentals of Real Estate (12 decks)

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