Module 5 Flashcards by Chelsea Iannaccio

The purchase price is credited to the buyer and debited to the seller.
A) True
B) False

B) False

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The initial deposit and other subsequent deposits are credited to the buyer.
A) True
B) False

A) True

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The new mortgage that the buyer will obtain is a debit to the buyer.
A) True
B) False

B) False

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The survey fee is debited to the buyer.
A) True
B) False

B) False

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40% of the title insurance policy premium will be debited to the buyer.
A) True
B) False

A) True

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Interest on mortgage payments that is assumed by the buyer are debited to the buyer and and in arrears.
A) True
B) False

A) True

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If the seller has prepaid the property taxes, the unused portion is a credit to the seller.
A) True
B) False

A) True

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If the buyer is buying an investment property and there is a tenant in the unit, the rent deposit is a debit to the buyer and credit to the seller.
A) True
B) False

B) True

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The cost to prepare the deed is a debit to the buyer and credit to the seller.
A) True
B) False

B) False

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The escrow fees will be split equally and will be debit to the buyer and the seller.
A) True
B) False

A) True

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The sales commission is most likely a debit to the buyer.
A) True
B) False

B) False

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In Hawaii, the cost of the survey is usually a debit to the seller.
A) True
B) False

A) True

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The net proceeds due to the seller will be a credit to the seller.
A) True
B) False

B) False

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There are two closings for an Agreement of Sale transaction; one for possession and one for title. What charge is not included in both closing statements?
 A) Conveyance tax
 B) Title search
 C) Escrow costs
 D) Recordation fees

A) Conveyance tax

Conveyance tax is only charged on the first closing and not when the balance is paid off.

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Upon the foreclosure of an Agreement of Sale, the vendee has an equitable right of redemption.
A) True
B) False

A) True

True. If there is any equity left after the creditors and other fees have been paid, the balance is given to the vendee.

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The VA provides guarantees for mortgages of veterans who become homeowners. Under this system:
A) The veteran is insured and payments are made by the VA if the veteran cannot pay
B) Lending institutions are guaranteed against loss within certain limits on their loans to veterans
C) Families of veterans are insured against losing their homes incase of the vet’s death
D) Builders are guaranteed against loss on homes constructed for veterans

B) Lending institutions are guaranteed against loss within certain limits on their loans to veterans

VA guarantees its loans to banks and FHA insures their loans to banks.

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A person obtains an insured loan which allows him to pay a lesser monthly amount for a certain period of time and which allows him to pay more each month during the next period of time. This is:
 A) An insured conventional loan
 B) An FHA (245) graduated payment loan
 C) A conventional loan
 D) A VA loan

B) An FHA (245) graduated payment loan

The FHA 254 graduated loan helps buyers with smaller monthly payments for a number of years and then increases the payments for the life of the loan. This method of financing allows the home owner to qualify for a loan.

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Mr. Smith has a VA loan. He is selling and intends to pay off the balance of the VA loan. What does he receive?
A) Re-issuance of his eligibility
B) Refund of discount points he paid
C) Information from his lender for a new mortgage
D) A promotion

A) Re-issuance of his eligibility

A veteran can sell his VA funded home and have his VA eligibility back if the buyer of his house pays off the loan with a new loan or is a qualified veteran and buys the house with his own certificate of eligibility.

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In a VA appraisal, what can the veteran do if the sales price exceeds the appraised value?
 A) Get a second mortgage
 B) Pay the difference in cash
 C) Make another offer
 D) Tell the appraiser that he is wrong

B) Pay the difference in cash

Veterans are allowed to pay a higher price than the Certificate of Reasonable Value (CRV, appraised value) but must make up the difference with cash.

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An FHA conditional commitment is an agreement by the Federal Housing Administration:
A) To indemnify the lender on a defaulted loan
B) To qualify the buyer for a new loan
C) To insure a loan made to a qualified buyer
D) To guarantee the value of the property

C) To insure a loan made to a qualified buyer

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The difference between origination fee and discount points is that:
A) Origination fee is to pay for the cost of processing the loan, and discount points are to increase the yield
B) Origination fee is tax deductible, and discount points are not
C) No difference
D) None of the above

A) Origination fee is to pay for the cost of processing the loan, and discount points are to increase the yield

Discount points are given to the lender to insure a higher rate of return to the investor in exchange for the lender giving a lower than market rate interest on the mortgage. The buyer or seller can pay for the discount points.

A blanket mortgage usually covers which of the following?
A) More than one piece of real estate
B) Both personal and real property
C) More than one type of transaction
D) Both the mortgaged property and the appropriate mortgage insurance

A) More than one piece of real estate

Blanket mortgages are required by the lender when the lender wants greater collateral than the subject property.

An insured loan that allows the borrower to make lower payments at the beginning of a loan and higher payments later in the period is called:
 A) A sale-lease-back
 B) An FHA graduated-rate loan
 C) A conventional loan
 D) A VA insured loan

B) An FHA graduated-rate loan

FHA 254 loan is an example of this type of loan.

A mortgage tied to an economic indicator is called:
 A) An escalation mortgage
 B) An acceleration mortgage
 C) A government mortgage
 D) An index mortgage

D) An index mortgage

Most mortgage rates are tied to an index established by the lender. Sometimes it may be the prime rate plus 2 points (percent).

``` An 80% loan-to-value ratio is characteristic of which of the following? A) A conventional loan B) An FHA insured loan C) A VA guaranteed loan D) A conventional guaranteed loan ```

A) A conventional loan The banks are required by banking regulations to give a 80% Loan to Value (LTV) mortgages. When banks give 97% LTV loans, Private Mortgage Insurance is required to cover the 17% in excess of the 80%.

Mortgages are discounted when sold to bring higher yield to the investor. True or False A) True B) False

A) True True. Discount points are given to the investor to increase their yield.

``` The buyer gives the seller a second purchase money mortgage for $40,000 at an interest rate of 10% and the buyer obtains a first mortgage for $10,000 at 15% interest. What is the average interest rate for the combined monies loaned? A) 10% B) 11% C) 12 ½% D) 15% ```

B) 11%

``` What is the annual debt service for a loan of $100,000 where the monthly payment rate is $9 per $1,000 and the interest rate is 9% for 20 years? A) $900 B) $9,000 C) $10,800 D) $18,000 ```

C) $10,800

``` When you apply for a mortgage and are guaranteed a mortgage at 9 ½% discount rate, this would be called: A) Nothing B) Extortion C) Lock-in D) Pledge ```

C) Lock-in A loan that has a lock means that the lender guarantees that the buyer can borrow money at the locked in rate.

An owner has a mortgage for $50,000 at 9% for 30 years with monthly payments of $403. What is true of this loan? A) $135,000 is the interest of the loan B) $28 is the principal paid on the first payment only C) $28 is the interest paid on the first payment only D) $403 is applied to principal on the first payment

B) $28 is the principal paid on the first payment only

Which is true regarding Ginny Mae (GNMA)? A) Buys FHA and VA loans B) Is under the jurisdiction and control of HUD C) Both of the above D) None of the above

C) Both of the above GNMA loans are for lower income groups and is administered by HUD.

The term "Debt Service" refers to payment of principal and interest. A) True B) False

A) True

``` In 1980, Fred bought a house and obtained a 30-year mortgage. In 1985, he sold the house and used the proceeds to pay off the loan. Which would have to indicate this? A) A release of mortgage B) A certificate of redemption C) Both of the above D) None of the above ```

A) A release of mortgage The borrower needs to make sure that the release of mortgage is recorded at the bureau to show that the mortgage has been paid off.

A couple decided to build a home and were required by the lender to have a 100% performance bond. This is in order to: A) Insure the performance of the contractor B) Insure performance of the equity lender C) Both of the above D) None of the above

A) Insure the performance of the contractor The bond protects the homeowner and lender in the event of a default by the contractor. The bonding agent will insure that the home will be completed if the contractor does not finish the job.

``` In a contract where the title is transferred and is seller financed, what instruments would be involved? A) Sales contract B) PMM only C) PMM and a note D) Deposit and a note ```

B) PMM and note

``` An instrument that is executed by the mortgagor, upon the sale of the mortgage to the assignee, in order to validate the full mortgage debt is: A) Release of mortgage B) An estoppel certificate C) A Novation clause D) A Defeasance clause ```

B) An estoppel certificate When the original lender sells the mortgage to the secondary market, the second investor sends the estoppel certificate to verify the mortgage amount and the interest rate. It is also called the Certificate of No Defense.

``` Which of the following is necessary for the completion of the sale of mortgaged property? A) Consent of the mortgagee B) Delivery of the deed by the grantor C) Both of the above D) None of the above ```

B) Delivery of the deed by the grantor Delivery of the deed transfers title to the property. All banks will require the recording of the mortgage and signing of the note.

A piece of property is held by Peter, Paul, and Mary. The note they sign with their mortgage states that they are jointly and severally liable. This means: A) Each is responsible for the entire indebtedness B) Peter and Paul are responsible for equal shares if Mary dies C) Peter, Paul, and Mary are each responsible for equal shares of the indebtedness D) Each is responsible for the indebtedness based upon his pro-rate of ownership

A) Each is responsible for the entire indebtedness Each borrower is liable for the total debt if the other borrowers are not able to pay their share.

``` Which clause in a mortgage or deed of trust changes priority of the encumbrances? A) A subordination clause B) A prepayment clause C) An acceleration clause D) An exculpatory clause ```

A) A subordination clause A first mortgage holder may agree to go to second mortgage position in favor of another lender who becomes the first mortgage holder.

``` What instrument usually accompanies a mortgage? A) A deed B) An Agreement of Sale C) A contract of sale D) A promissory note ```

D) A promissory note The promissory note guarantees the loan in the event the mortgage is not paid in full by the sale of the mortgaged property.

If a foreclosure sale produces less than the amount necessary for the outstanding debt and expenses, which of the following is true? A) The mortgagor can exercise his right of redemption B) The mortgagor is liable only for the expenses not paid C) The mortgagor suffers the loss D) A deficiency judgment may be obtained against the mortgagor

D) A deficiency judgment may be obtained against the mortgagor Hawaii is a deficiency judgment state and the lender can force the borrower to pay the loan amount from other sources of income that may not be paid by the sale of the mortgage property.

``` One buyer made a $32,000 down payment on an $80,000 purchase. The balance was by way of a 25-year mortgage with payments of $587 per month. What was the total amount of interest paid over the life of the loan? A) $86,100 B) $144,100 C) $96,100 D) $128,100 ```

D) $128,100

``` An owner receives monthly payments in the form of a loan that must be repaid in full upon the sale of the property or the death of the owner. This is a: A) Reverse annuity B) Agreement of Sale C) Life insurance D) Life estate ```

A) Reverse annuity The reverse annuity is for older people who have a high equity in their home. The bank agrees to pay the borrower a monthly income until he dies. The bank is repaid the amounts that were advanced to the borrower from the sale of the property or if the loan is refinanced by the beneficiaries.

``` In a conventional mortgage where the loan-to-value (LTV) is 90%, the lender may require: A) A cosigner B) Private Mortgage Insurance (PMI) C) Additional security D) Fire insurance ```

B) Private Mortgage Insurance (PMI)

Non-judicial foreclosure provides for which of the following? A) Advertising and sale of the mortgaged property B) Statutory period of redemption C) Both of the above D) None of the above

A) Advertising and sale of the mortgaged property The non-judicial foreclosure process avoids the lengthy and costly judicial foreclosure process.

``` A Hawaii property owner can redeem his property within one year after: A) A real property tax sale B) A foreclosure sale C) Both of the above D) None of the above ```

A) A real property tax sale Only a real property tax sale can be redeemed in Hawaii. Non-Judicial and Judicial foreclosures do not allow a one year redemption period.

A person who is not fully compensated for furnishing labor or materials for improvements of real estate has which of the following rights? A) To sell the property at a foreclosure sale B) To file a Mechanic's Lien C) To file a Judgment Lien D) All of the above

B) To file a Mechanic's Lien The mechanics lien must be filed within 45 days from the date the owner files a notice of completion with the courts.

Which of the following is true regarding a Mechanic's Lien? A) An application for a Mechanic's Lien must be filed within 45 days after completion of the project B) The lien expires 90 days after the entry of the court directing the lien to attach, unless legal proceedings are commenced within that time C) Both of the above D) None of the above

The creditor must start legal proceeding to collect the amount owed within 90 days after the judge deems the creditor has a legal right to collect the amounts that are owed to him. The lien expires 90 days after the entry of the court directing the lien to attach, unless legal proceedings are commenced within that time

A materialman's lien is superior to which of the following? A) A first mortgage recorded prior to the time of the visible commencement of work B) A lien for delinquent real property taxes C) Mechanic's lien for broker's commission D) Previously recorded judgment liens

C) Mechanic's lien for broker's commission Brokers do not have the right to file a lien for commissions owed.

The lender wants to ensure the first priority of its lien. The lender should make sure of which of the following? A) All other liens are removed from title or subordinated from the property being used as collateral B) The borrower has an unconditional fee simple estate with no liens C) The borrower's father has cosigned the note D) The loan is insured

A) All other liens are removed from title or subordinated from the property being used as collateral