Chapter 9

Question 1

A real estate promissory note that reads “$50,000 principal payable interest only monthly at a rate of 10%” is what type of promissory note?

Answer 1

straight

Question 2

A real estate promissory note reads “$557.50 per month for 239 payments, then a final monthly payment of $2,011.19”. This is an example of a/an:

Answer 2

balloon payment

Question 3

Under a trust deed (deed of trust) the:

Answer 3

trustor deeds to trustee

Question 4

An enforceable due-on-sale clause is correctly called a/an:

Answer 4

alienation clause

Question 5

In a normal sale using both a grant deed and a trust deed (deed of trust) the buyer is the:

Answer 5

grantee and trustor

Question 6

Which of the following liens are NOT eliminated by a foreclosure sale? 
State, county or city taxes 
  Federal tax liens 
  All of the answers are correct 
  State, county, or city assessments

Answer 6

All of the answers are correct

Question 7

A type of financing instrument where the owner (vendor) retains the legal title until the buyer (vendee) fulfills the terms of the purchase contract:

Answer 7

installment sales contract

Question 8

Under the Trustee’s Sale procedure, after a Notice of Default has been recorded, a borrower has how long to reinstate by making up past payments, penalties, late charges, and trustee expenses?

Answer 8

5 days prior to trustee’s sale date

Question 9

The Equal Credit Opportunity Act requires a lender to:

Answer 9

not discriminate on the basis of race, creed, color, sex, origin, marital status

Question 10

The successful bidder at a Trustee’s Sale (foreclosure) receives what type of deed?

Answer 10

trustee’s

Question 11

If a real estate loan is paid off in advance of the due date, some lenders are legally allowed to charge a penalty. This is called what type of penalty?

Answer 11

prepayment

Question 12

What provision in an instrument of finance would permit a change in the priority of liens on a property?

Answer 12

Subordination clause

Question 13

The Mortgage Loan Broker Law does not apply to first loans of $30,000 or more and second deed of trust loans of:

Answer 13

$20,000

Question 14

A clause in a financial instrument that allows a lender to demand immediate payment of the entire note balance is known as a(n):

Answer 14

acceleration clause.

Question 15

Which of the following regarding a Trustee’s Sale is false?

Answer 15

after the sale the dispossessed owner has a one-year right of redemption

Question 16

An owner sells and the buyer takes over the existing loan. To relieve the seller of primary liability, the buyer must:

Answer 16

assume the note and trust deed

Question 17

The use of borrowed funds to acquire a property is technically called:

Answer 17

leveraging

Question 18

In a trustee’s sale the proceeds of the sale were sufficient to pay the demands of the first and second trust deed holders, foreclosure costs, and provide a small cash surplus. What is the priority schedule for the distribution of the cash proceeds?

Answer 18

first trust deed; second trust deed, foreclosure costs; trustor

Question 19

$300,000 loan at 8% payable $2,000 per month is what type of note?

Answer 19

straight

Question 20

Which of the following is FALSE concerning the APR?

Answer 20

It is expressed as a weekly rate

Question 21

In an ARM loan, the distance between the borrower’s rate and the index is called the:

Answer 21

margin

Question 22

A copy of a Mortgage Loan Disclosure Statement prepared by the broker and signed by the borrower must be retained by the broker for at least:

Answer 22

three years

Question 23

A clause in a trust deed that states that the lender’s rights shall become secondary to a new trust deed is called:

Answer 23

a subordination clause

Question 24

Under the Real Property Loan Law the maximum amount a borrower can pay for closing costs, excluding commission, regardless of the size of the loan is:

Answer 24

$700

Question 25

Under the Real Property Loan Law a prepayment penalty cannot be charged for loans of:
5 years or less
6 years or less
3 years or less
can be charged on all of the above, except A

Answer 25

can be charged on all of the above, except A

Question 26

Which of the following words expresses a meaning most completely opposite the term “alienation”?

Answer 26

acquisition

Question 27

For loans that fall under the California usury law, the maximum interest rate is:

Answer 27

10% or 5% above the Federal Reserve Discount Rate whichever is greater

Question 28

The loan-to-value ratio on a mortgage is defined as the:

Answer 28

loan amount as a percentage of the sales price or appraised value, which ever is less.

Question 29

A property is usually appraised in what phase of the financing process?

Answer 29

analysis

Question 30

Any loan payment twice as large as a regular payment is called a:

Answer 30

balloon