Financing Flashcards
The Federal Truth-in-Lending Law (Regulation Z) gives the borrower a 3-day right of rescission when the loan is:
A loan secured by a second deed of trust, or mortgage on owner-occupied single-family residence when the money is borrowed subsequent to the purchase. Truth-In-Lending Act: This Act was designed to protect the Borrower by requiring the Lender to make a meaningful disclosure of credit terms to the Borrower. The Truth-in-Lending Act would not cover Agricultural Loans. The right of rescission only applies to home equity loans or lines of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee. The 3 days begins when Loan documents are signed by the borrower.
In making new real estate loans, institutional lenders often charge a fee for expenses incurred for such items as document preparation and related work. The fee charged is often a percentage of the face amount of the loan, and is referred to on the borrower’s closing statement as a:
loan origination fee. Document preparation charges are usually charged for as part of the loan origination fee.
The term “security interest” is best defined as:
The creditor’s interest in the debtor’s property A creditor maintains a security Interest in the property of a debtor.
The monthly payment on a mortgage loan is, by statute, considered late when received by the lender:
More than 10 days after the due date Payment is considered late if the Lender receives it more than ten (10) days after the due date.
Which of the following defines a mortgage loan?
A loan collateralized with real estate A mortgage loan is collateralized with real estate. The word “mortgage” refers to the pledge that the buyer makes to the lender, promising the property as collateral for the loan. Mortgage loans are applicable without an exchange of real property, such as with a refinance of a home.
Lenders know that the lower the loan-to-value ratio, the higher the:
equity. Loan-to-value ratio (LTV) is a ratio of the percentage of the appraised value of a property that a lender will loan. The lower the ratio, the higher the equity. An LTV ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Loans with high LTV ratios are higher risk so, if the mortgage is approved, the loan will generally cost the borrower more. Sometimes, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender.
Which lender is the major source for junior loans negotiated today?
Private lenders Private lenders are the major source for junior loans negotiated. A junior loan is a subordinate loan to a primary mortgage that uses the same home as collateral.
When the general level of prices decreases:
The value of money increases In economics, a decrease in prices is called “deflation”. When this happens, the overall value of money increases because each dollar can purchase more. So, when the general level of prices decreases, the value of money increases. This economic principle affects the real estate market as well as the cost of goods and services.
The purpose of a “release clause” in a mortgage is to:
Allow the release of some properties upon partial payment, when more than one property is used as security for the debt A Release Clause is often found in a Blanket Mortgage which allows portions of property to be released from a lien as payments are made.
Which of the following does not directly affect the level and movement of mortgage interest rates?
The rate of unemployment Unemployment DOES NOT directly affect the level and movement of interest rates, although it can indirectly have an effect. The inflation rate and the supply and demand of money all directly affect the market, which directly affects interest rates.
Carol made an offer to purchase Greg’s property. As part of the offer, Carol agreed to take title “subject to” an existing VA loan which Greg obtained when they purchased the property in the approximate amount of $39,000. If Greg sells to Carol under these conditions, which of the following is true concerning liability for a loss suffered by the government after a foreclosure on the VA loan?
Greg will be primarily liable When property is sold “subject to” an existing loan, the seller is still primarily liable for the loan. A “subject to” clause in a deed states that the grantee takes title “subject to” an existing mortgage. The original mortgagor (the seller) is solely responsible for any deficiency, should there be foreclosure of the mortgage. This differs from an “assumption” clause, whereby the grantee “assumes” and agrees to pay the existing mortgage.
The “Open End” clause in a mortgage would benefit the borrower the most if he
Borrowed additional money Open-End Clause is a provision in mortgage contract that declares the mortgaged real estate may be used as security to borrow additional money
The type of mortgage loan which permits borrowing additional funds at a later date is called:
An open-end mortgage Open-End clause is a provision in a mortgage contract that declares the mortgaged real estate may be used as security to borrow additional money
When the term “beneficiary statement” is used by those in real estate finance, it identifies a statement made:
By the lender, as to the current balance due to pay off a real estate loan; Beneficiary Statement: Document in which the Lender provides the present balance of a loan.
When the real estate market changes from a buyer’s market to a seller’s market, which of the following results could naturally be expected?
Prices would rise because of the increased demand and lagging supply In a seller’s market, there are more capable buyers and more demand than there are available properties, so prices will rise due to the increased competition. In a buyer’s market, there is a greater supply of properties than of capable buyers or of demand, so the lack of competition results in lower prices.
