Financing Flashcards by Martin Flores Jr

Define Elongated

Long in relation to Width, esp. unusually so.

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What are the courses of action would the Federal Reserve Board take during an elongated period of “Tight Money”?

Purchasing Large Blocks of Gov’t Bonds
Lower the reserve req’ments of Bank Members
Decrease the discount rate for Bank Members

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What is “Tight Money”?

A decrease in spending dollars b/c of a decrease in the money supply.

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What is best expresses the terms assume & subject to?

When a Buyer takes title subject to an existing loan, he takes no liability for the note.

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What is Hypothecate?

is when a borrower pledges a piece of collateral, such as a rental property, home or movable asset like Car, Boat, or Stocks, to obtain a loan.

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What is Subordination?

is the process of ranking home loans (Mortgage, HELOC or Home Equity Loan) by order of importance.

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What is 2nd-Mortgage (Jr-Lien)?

is a loan you take out using your house as collateral while you still have another loan secured by your house.

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What is a Interim Loan?

are no interest, no fee, short-term construction Loans, provided by the Trust to Borrowers.

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What is Construction Loan (aka “Self-Build Loan”?

is a Short-Term Loan used to finance the building of a home or another Real Estate Project.

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What is a Take-Out Loan?

A type of Long-Term Financing that replaces Short-Term Interim Financing.

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What is request of Notice of Default?

It means the Borrower must immediately remit pymt & other costs, such as filing fees, or the prime lender may take legal action, usually a foreclosure.

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Why would a Trustor (Borrower) benefit from a Subordination Clause?

This makes it easier to obtain an additional loan on their property.

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Who signs a Deed of Reconveyance?

A Trustee

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What is a Deed of Reconveyance?

A deed of reconveyance is a document that transfers a property’s title from a mortgage lender to the borrower, indicating that the borrower has fulfilled their obligation to repay the loan and now owns the property.

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What is a Holder in Due Course?

is a legal term to describe the person who has received a negotiable instrument in good faith and is unaware of any prior claim, or that there is a defect in the title of the person who negotiated it.

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You purchase a negotiable note & have no knowledge of any defects. You are know as:

Holder in Due Course.

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Who benefits from a Subordination Clause in a Deed of Trust?

A Trustor (Borrower)

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Who signs a Deed of Reconveyance?

Trustee

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A borrower on a new loan is req’d to advance $412 for an Impound acct. He would do so for the benefit of:

The Trustor Only.

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A borrower on a new loan is req’d to advance $412 for an Escrow acct. He would do so for the benefit of:

The Mortgagor & the Mortgagee.

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A Broker negotiated a Hard Money $4K Note secured by a 2nd Deed of Trust w/ a term of 4 yrs, for a client. Considering the above transaction, what is the Max legal commission?

$600 (15%)

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A Check is a:

Negotiable Instrument

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A Client contacts you to give you a listing. You look at his papers & discover that he is purchasing the property on a contract of sale. The contract contains no Acceleration Clause & there are no restrictions in the contract of sale prohibiting resale or assignment. Your Client could:

Sell or Assign his rights but not his duties w/out approval of the contract seller.

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As a condition of granting a loan, a lender will often charge discount pts. What is not true concerning discount pts?

FHA & VA regulations forbid the lender to charge discount pts when their agencies insure or guarantee the loan.

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Assume you have a job for an insurance company to procure 1st trust deed loans & you are compensated for your services. This req's:

An Active RE Broker's License

Assume you purchase a piece of property & execute a promissory note. In this situation you are:

The maker of the note.

At time when money is considered tight:

A seller may have to pay for all the pts. in order that the buyer may obtain an FHA Loan.

Beneficiaries prefer purchase money mortgages & deed of trust b/c they have priority over:

Buyer's Liens at the time of purchase.

Broker, Jenny Johnson, was approved for the $200K Bank Loan that she needed to open up her Real Estate Office, as long as as she agreed to keep $20K in a Saving Acct. at the Bank at all times during the term of her Loan. This is known as:

Compensating Balance.

Broker are req'd to retain copy of the Mortgage Loan Disclosure Statement in their office files for a period not less than:

3 Years.

"CRV" is common phrase used in the financing of Real Estate. The CRV is issued by the:

VA (Veteran's Administration)

What is "CRV"?

Certificate of Reasonable VAlue- A Veterans Administration appraisal that esta. the Max VA Mortgage Loan Amt. for a specified property.

Considering Construction Financing, the Lender will usually release the final pymt to the borrower when:

The Lien Period has expired.

Doug is a homeowner who has failed to make pymts on a Trust Deed for 2/mos. The Trustee has Recorded a Notice of Default. What does Doug have?

Right of Reinstatement.

Edna Hall is a farmer & needs to raise additional working capital & wishes to encumber her growing crops. If the lending institution is agreeable to this, Ms. Hall would be asked to sign a:

Financing Statement.

FHA uses MPR in connection w/ Loans they insure. MPR means:

Minimum Property Req'ment.

1st Savings Bank granted a Construction Loan in a 5-Stage Plan for the development of a new local mall. When would the last pymt be made?

After the Mechanic's Time Lien has Expired.

Following a Trustee sale, the money is dispersed in the following manner:

Cost & Expenses of Sale, 1st Trust Deed, 2nd Trust Deed, Balance to the Trustor.

Gerald, who is a 17yo minor, wishes to purchase a home. This can be done legally when:

Buying a home under the Cal-Vet Program.

I = P x R x T has to do w/:

Real Estate Loans

What is I = P x R x T?

``` I = Interest P = Principal R = Rate T = Time ```

If the Annual % Rate provided in the Good Faith Est. is out of tolerance under TILA (Truth In Lending Agreement), creditors must provide a corrected TIL Disclosure Statement to a consumer:

On or Before the 3rd Business day before consummation of the Transaction.

What does Consummation mean?

The pt. at which something is complete or finalized.

In 1968 a new organization was formed to assume many of the functions of the Federal National Mortgage Association. This organization also works hand in hand w/ the Dept. of Housing & Urban Development (HUD). This organization is know as:

Ginnie Mae & Gov't National Mortgage Association.

In a Construction Loan situation, the Lender agrees to an obligatory advance agreement which states that the contractor will receive funds as the construction progresses. The contractor will receive the final pymt:

When the Lien period had expired.

In a Deed of Trust, who is the Borrower?

Trustor.

In a promissory note & mortgage signed by 2 or more co-borrowers, when 1 of the co-borrowers defaults, what is the Liability?

Ea. is Jointly & Severally Liable.

In checking docs in the county recorder's office, you will find that the recorded Deed of Trust refers to Standard Clauses contained in a previously recorded Deed of Trust. This previously recorded Deed of Trust is known as a:

Fictitious Deed of Trust

In dealing w/ a Sale w/ a Land Contract "Subject to" a Blanket Encumbrance containing a Release Clause, funds are deposited in an acct. approved by the Real Estate Commissioner for the protection of:

Vendee.

In purchasing a house, which of the following Methods of Financing could be accomplished w/out a down pymt?

VA (Veterans Affair) Loan.

In Real Estate Financing, Lenders will sometimes find it necessary to refer to "Nominal Rate" when granting a Loan. This means:

It is the Rate of Interest specified in the Promissory Note.

In the course of offering a Note for Resale, Mr. Kim, an investor, explains that the Note contains an Alienation Clause. This one fact would:

Make the Note more Negotiable.

What is an Alienation Clause?

AKA a "Due-On-Sale Clause", is a Real Estate Agreement that req's a Borrower to pay the remainder of their Mortgage Loan off immediately during the Sale or Transfer of a property title and before a new buyer can take ownership.

Insurance companies represent of the major sources of Conventional Loans. Insurance companies:

Loan Funds on better type properties.

Jane offers to purchase Stan's property for $139K. Jane takes title "Subject to" a VA Loan. What is the effect on Liability?

Stan is Liable for the Loan.

Joe wants to expand his business & plans to purchase a piece of Industrial Property. He applies for a loan to help purchase the property. The lender is most interested in:

The financial condition & credit standing of the individual or company applying for the loan.

The Trustor(Borrower) under a Deed of Trust is the party who:

Signs the note as Maker.

The Type of Interest charged on Home Loan is:

Simple Interest

There are many differences between Mortgagees & Deed of Trust. What is the similarity?

Security of the Loan.

Trustor is to Beneficary as:

Mortgagor is to Mortgagee.

Under a Land Contract or a Condition Contract of Sale, the seller would not normally initiate a legal action based upon:

An agreement not to record.

What is the Federal Law req'ing Mortgage Loan Originators to be licensed according to National Standards?

Secure & Fair Enforcement for Mortgage Licensing Act.

What is the Max Loan available on a VA Loan?

$45K.

When a Loan is Fully Amortized by Equal Monthly pymts of Principal & Interest. The amt(s) applied to the Principal:

Increases while the Interest pymt decreases.

When a trust deed is sold, the parties use an escrow in order to:

make sure that conditions and terms are met prior to the settlement of the transaction.

When purchasing a property under the California Farm and Home Purchase Act, would it be possible to obtain secondary financing at the time of purchase?

Yes, secondary financing is allowed at the time of purchase and all during the loan period

Which agency holds the deed on a Cal-Vet loan?

Department of Veterans Affairs.

Which of the following institutions invests most of their funds in home loans?

Federal savings banks.

Which of the following forms would be required when selling a promissory note served by a trust deed in which an appraisal of the real property is compulsory as in regards to the real estate code?

An agreement of sales

Which of the following requires mutual mortgage insurance?

FHA