Financing Real Estate Flashcards
Which of following is a benefit of real estate ownership?
(a) Borrowing money against the value of the property.
(b) Future appreciation.
(c) Forced saving by paying down the amount owed.
(d) All of the above
(d)All of the above
Often the greatest financial benefit of real estate ownership is that it can be used as security for a loan. By borrowing money against the value of the property, home purchasers benefit from present use, future appreciation (increase in value), and forced saving by paying down the amount owed.
When borrowing money to purchase real estate, the “cost of credit” refers to
(a) loan origination fees charged by the lender.
(b) the rate of interest charged to the purchaser.
(c) the terms of the loan.
(d) the down payment.
(b)the rate of interest charged to the purchaser.
When the purchaser receives credit from the seller or some other source of financing, the cost of that credit is the rate of interest charged.
When the Federal Reserve Board wants to tighten the money supply, it would
(a) raise the amount of reserves required for member banks.
(b) raise the discount rate for member banks.
(c) sell government bonds or treasury bills on the open market.
(d) All of the above
(d)All of the above
The Federal Reserve Board (“Fed”) would take all of the above actions to curb inflation. For example, in a tight money market where the supply of money is limited and the demand for money is high, interest rates typically go up.
Which of the following contributed to the current subprime lending crisis?
(a) Loans that required little or no down payment.
(b) No-doc loans in which the borrower’s stated income was not verified.
(c) Low “teaser” interest rate loans with much higher payments when the initial rate period ended.
(d) All of the above
(d)All of the above
Many loans required little or no down payment, and borrowers were able to take advantage of no-doc loans in which the borrower’s “stated income” was not verified. So-called subprime borrowers (based on their credit histories) who would formerly have been denied a loan, or offered a loan only at a high interest rate, found ready sources of funds. Low “teaser” interest rates attracted borrowers who failed to notice, or understand, the likely future jump in payment amounts when the initial rate period ended.
Which of the following is exempt from usury laws in California?
(a) Any loan made or arranged by a real estate broker and secured by real property.
(b) Loans made by banks and savings and loan associations.
(c) Both (a) and (b) are exempt.
(d) Neither (a) nor (b) are exempt.
(c)Both (a) and (b) are exempt.
In 1979, California voters passed Proposition 2, which exempted from usury laws any loan made or arranged by a real estate broker and secured by real property. California law also exempts loans made by banks and savings and loan associations.
To pledge a thing as security for an obligation without surrendering possession of it refers to
(a) hypothecation.
(b) alienation.
(c) transformation.
(d) substitution.
(a)hypothecation.
A holder in due course is someone who takes a negotiable instrument
(a) for value.
(b) in good faith.
(c) without notice of any defense against its enforcement.
(d) All of the above
(d)All of the above
The instrument used to secure a loan on personal property is called a
(a) bill of sale.
(b) trust deed
(c) security instrument.
(d) bill of transfer.
(c)security instrument.
A deficiency judgment against a mortgagor is possible
(a) when the current market value of the property is less than the remaining loan balance.
(b) as long as market demand exceeds supply and prices continue to rise.
(c) on a purchase-money mortgage.
(d) never since anitdeficiency laws protect homeowners in California.
(d)never since anitdeficiency laws protect homeowners in California.
A deficiency judgment is a judgment against a borrower for the balance of a debt owed when the security for a loan is insufficient to satisfy the debt. A deficiency occurs when the foreclosure sale of a property produces less than the amount due on the loan. In California, a mortgagee cannot recover a deficiency judgment on a purchase-money loan. In those states where mortgages generally carry a “power of sale,” creditors must bring a separate action to obtain a deficiency judgment.
A request for notice of default would be of most help to the
(a) beneficiary of a second trust deed.
(b) trustor.
(c) beneficiary of a first trust deed.
(d) trustee.
(a)beneficiary of a second trust deed.
Since foreclosure wipes out all junior liens, the holder of a junior lien should request the recording of a request for notice of default announcing that a default has occurred.
In addition to prohibiting discriminatory language in real property instruments, the Unruh Act also
(a) requires more explicit notice be given to a trustor or mortgagor in default.
(b) regulates the amount of home equity an owner can protect.
(c) stipulates certain contract rescission rights.
(d) regulates contracts between blood relatives and/or spouses.
(a)requires more explicit notice be given to a trustor or mortgagor in default.
California’s Unruh Civil Rights Act covers contracts for goods and services. If a mortgage with a power-of-sale clause or deed of trust on a single-family owner-occupied residence stems from a contract that falls with the Unruh Act, even more explicit notice must be given to a trustor or mortgagor in default.
An agreement to sell a homeowner’s equity in the home describes a
(a) home equity mortgage.
(b) real property sales contract.
(c) deed of trust.
(d) bill of sale.
(a)home equity mortgage.
A home equity mortgage is an agreement to sell a homeowner’s equity in the home. It is regulated by the California Civil Code, which requires specific notice, including right of cancellation, to the homeowner.
Which of the following would NOT be illustrative of an institutional lender?
(a) Insurance company
(b) Savings and loan
(c) Commercial bank
(d) Mortgage company
(d)Mortgage company
Institutional lenders are those lenders who lend their own money. A mortgage company usually does not lend its own money, but rather acts in most cases as the representative of an institutional lender. They are sometimes referred to as “loan correspondents” or “loan brokerage firms.”
A loan where lower monthly payments rise gradually over five to ten years, then level off for remainder of term is called a
(a) Growing Equity Mortgage (GEM).
(b) Reverse Annuity Mortgage (RAM).
(c) Graduated Payment Mortgage (GPM).
(d) Adjustable Rate Mortgage (ARM).
(c)Graduated Payment Mortgage (GPM).
Which of the following types of lenders makes the greatest number of different types of loans?
(a) credit unions.
(b) insurance companies.
(c) commercial banks.
(d) mutual savings banks.
(c)commercial banks.
Commercial banks make the broadest range of loans, including those for real estate purchase, construction, and interim financing, and even consumer loans for home improvement.
