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real estate exam > Class 11 - Liens, the loan process, and financial math > Flashcards

Class 11 - Liens, the loan process, and financial math Flashcards

1
Q

A note makes a borrower…..

A

personally liable for a debt

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2
Q

Discounts when used in financing can be best described as…

A

an amount paid to increase a lender’s yield

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3
Q

A mortgage lien would be classified as a _________, _________ lien

A

specific, voluntary lien

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4
Q

Notice given to the public of a possible future litigation against a property is called…

A

lis pendens

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5
Q

A note that removes personal liability is known as…

A

non-recourse note

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6
Q

An acceleration clause in a note would allow a lender to…

A

demand full payment of the debt

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7
Q

An underwriter can be best described as a person who…

A

reviews loan applications and makes recommendations to a lender

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8
Q

An open note or mortgage is one that

A

allows the borrower to prepay the loan without penalty

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9
Q

A property owner who sold his land discovered that he had to pay a penalty of $4,000 for paying off the loan before the termination date of the note. The owner most likely had a….

A

97% conventional mortgage

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10
Q

A lender who charges a usurious rate of interest is most likely charging a rate of….

A

interest in violation of the law

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11
Q

The payment of principal on a mortgage debt increases the property owner’s:

A

equity

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12
Q

When an investor purchases a property for $95,000 after putting $5,000 down and then sells the property for $120,000 it can be said that the profit was made through the use of…

A

someone else’s money

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13
Q

The rate of interest on a loan can be found by:

A

dividing the interest by the loan amount.

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14
Q

A _________ secures your _________ and becomes effective upon recording

A

Mortgage

debt

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15
Q

A _____ is a claim against property made to secure a debt. This is also called an _____ against the property, which is something that burdens a title

A

Lien

encumbrance

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16
Q

General Lien vs Specific Lien

A

General lean covers both real and personal property. Examples: judgment lien, inheritance tax lien, etc.

Specific lien covers a specific property: Examples: mortgage, mechanic’s lien, real estate tax liens, special assessments, etc.

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17
Q

What is the priority of liens?

A
  1. Real estate taxes
  2. special assessments
  3. Liens in order of recording
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18
Q

Real estate tax liens are also called ________ (according to value), and are charged to help pay for state and local services. Who is exempt from paying this type of tax?

A

Ad Valorem tax - a tax on property according to its value

cities, schools, gov’t property, churches, hospitals,

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19
Q

If a buyer at a tax sale has paid the owners taxes, what does he get?

A

A tax certificate indicating paid

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20
Q

Special Assessment

A

a tax charged on properties that benefit from a public improvement like a sidewalk or sewer.

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21
Q

When you get a loan from a lender, what is used to secure the payment of a debt

A

voluntary mortgage lien

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22
Q

A _________ lien is a lien for the non-payment of work or materials. When recorded, what is the start date

A

Mechanic’s lien

A mechanic’s lien dates back to the day the work began or when material was delivered.

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23
Q

A lien placed on real or personal property by court order

A

jugdment lien

**Judgment liens are not effective against personal proeprty until the proeprty is seized

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24
Q

A _______ is used to legally seize property. It is to prevent a property owner from selling the property during a legal action against the property. This gives the court custody of the property.

A

Attachment

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25
Q

Where does an IRS tax lien fall into the order?

A

By date and does not supersede other recorded liens

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26
Q

_______ leverage occurs when the cost to borrow is below the return on an investment

A

Positive

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27
Q

____________ leverage occurs when the cost of borrowing exceeds the return on an investment

A

negative

28
Q

Lenders base their loans on what?

A

Sale price or appraisal price, whichever is lower

29
Q

What is equity?

A

The value of a property minus any liens

30
Q

FHA _________ loans, does not directly provide them

A

INSURES

31
Q

VA __________ loans, does not make loans

A

Guarantees

32
Q

What type of information is given to a lender for a loan applications

A 
debs
assets
credit history
employment
source of funds
33
Q

Underwriters consider three areas of underwriting:

A

collateral
capacity
credit reputation

34
Q

Who pays for the title examination once your loan has been approved?

A

Borrower

35
Q

Whats the purpose of a title search?

A

To make sure there are no claims against the title

36
Q

After the loan has been made, next step is to _____________. This is simply the process of collecting the payment and applying it to the debt

A

Servicing the loan

37
Q

What is a note?

A

A promise made to repay a debt

38
Q

What is the PRIMARY financial document

A

A note

39
Q

What makes the borrower personally liable for a debt (and what can you do to remove the personal liability)

A

A note makes the borrower personally liable for a debt.

A non-recourse note removes the personal liability by including an exculpatory clause; the property must stand good for the debt.

40
Q

What are the contents of a note?

A

terms for repayment
default clause
acceleration clause

41
Q

A clause in a note or mortgage that allows the lender to demand full payment of the debt if the borrower defaults…

A

Acceleration clause

42
Q

Charging more than the legal rate

A

Usury

43
Q

A clause in a mortgage that allows the lender to demand fully payment of the debt if the mortgagor transfers title without the lender’s consent

A

Alienation Clause

44
Q

A clause in a mortgage that defeats a lender’s interest when the debt is paid. Acts as a mortgage release

A

Defeasance Clause

45
Q

A clause in a mortgage that allows the lender to demand full payment of the debt if the property is sold.

A

Due on Sale Clause

46
Q

A clause in a note that allows the lender to increase the rate of interest

A

Escalation clause

47
Q

A document given be a mortgagor to a mortgagee to verify a loan balance when a mortgage is sold or assigned. Also called an estoppel certificate

A

Certificate of no defense

48
Q

A financial document that acts like a mortgage becuase it secures property for the payment of a debt by conveying title to a third party called the trustee

A

Deed of trust

49
Q

A personal judgment against a borrower for the balance due on a debt when the security is insufficient to pay the debt

A

Deficiency judgment

50
Q

A legal procedure where a property is sold to settle a debt

A

foreclosure

51
Q

A lien against real and personal property

A

General lien

52
Q

A claim against property

A

Lien

53
Q

_______ is what the lender charges for the use of their money.

A

Interst

54
Q

A ______ will specify the interest rate

A

note

55
Q

__________ fees are charged to start or originate the loan process.

A

Origination

56
Q

Discount points and origination fees are charged as a percentage of the…

A

loan amount

57
Q

A mortgage note that can be paid off early with no prepayment penalties is called ________________

A

open note or open mortgage

58
Q

Loans above ____% typically have pre-payment penalties

A

80%

59
Q

What two types of loans do not contain prepayment penalties

A

FHA and VA

60
Q

The word mortgage means “_______”

A

dead pledge

61
Q

Mortgages become effective when they are…

A

recorded

62
Q

What happens in a title theory state?

A

A mortgage conveys legal title to a lender and the borrower has equitable title

The lender holds the title until the deed is paid

Lender can also immediately possess the property if the borrower defaults, thereby avoiding judicial foreclosure

63
Q

What happens in lien theory states

A

A mortgage conveys legal and equitable title to a BORROWER and the lender has only collateral. Lender has only a lien interest

64
Q

In a lien theory state, the mortgagor ________ which means to pledge property without giving possession rights to a lender.

A

hypothecates, which means you offer it as safety collateral for a mortgage

65
Q

Duties of a mortgagor (borrower) - A mortgage requires the mortgagor (borrower) to:

A 
pay real estate taxes
insure the property
pay debt according to the note 
keep property in good repair 
get permission from the lender before removing any portion of the mortgaged property
66
Q

As a general rule, the lender’s yield will increase by 1/8% for every discount point charged

A

real estate exam (19 decks)

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