Notes Flashcards
Most homes are bought with ___.
Borrowed money
Because of the ever-changing requirements of the secondary market, it is best for licensees to ___ before writing a sales contract.
Refer consumers to a lender to be pre-approved for a loan
The person who borrows money to buy a piece of property voluntarily gives the lender the right to ___ if the borrower fails to repay the loan.
Take the property
In a mortgage, debt is created through a(n) ___, which is a negotiable instrument.
Promissory note
___ are considered a “personal promise to pay” and “evidence of a debt.”
Promissory notes
The ___ is a contract that secures the repayment of the debt on a home loan by stating the terms under which the debt is to be repaid and what could happen if the debt is not repaid.
Mortgage
A basic principle of property law is that no one can convey more than ___.
they actually own
The owner of a fee simple estate can mortgage the ___.
fee simple interest
The owner of a leasehold or subleasehold can mortgage the ___.
Leasehold interest
The owner of a condominium unit can mortgage the ___.
Fee interest in the condominium
A mortgage loan creates a relationship between a(n) ___ and a(n) ___.
debtor
creditor
In a mortgage, the debtor agrees to pay or pledges to pay the ___ and ___ according to an agreed schedule
principal and interest
In a mortgage, the debtor agrees to offer ___ or ___ to the creditor if the loan is not repaid.
some property or collateral
Mortgage loans are ___ loans.
secured
What are the 2 parts of a mortgage?
1) The debt itself
2) Security for the debt
When a property is mortgaged, the owner must execute or sign what 2 separate instruments?
1) Promissory note stating the amount owed
2) Security document
In a mortgage, a borrower is required to pledge ___ as security (collateral) for the loan.
Specific real property
The right to ___ on the pledged property in the event a borrower defaults is contained in a security agreement such as a mortgage or deed of trust.
Foreclose
The right to foreclose on the pledged property in the event a borrower defaults is contained in a security agreement, such as a(n) ___ or a(n) ___.
Mortgage
Deed of trust
When the terms of the ___ is satisfied, the debt is discharged.
Promissory note
If the terms of the promissory note are not met, the lender may choose to ___ or ___.
Sue or foreclose
Most mortgages have interest in ___.
Arrears
Lenders can be ___ for making usurious loans
penalized
In IL, what is the legal limit imposed on the rate of interest that a lender may charge a borrower on a loan secured by real estate?
No legal limit specified
In IL, residential first mortgage loans made by federally chartered institutions, or loans made by lenders insured or guaranteed by federal agencies, are ___ from state interest regulations.
Exempt
In IL, residential first mortgage loans made by federally chartered institutions, or loans made by lenders insured or guaranteed by federal agencies, are subject to ___ in regards to interest regulations.
Federal limits
The federal government treats loan origination fees like ___ because they increase the lender’s yield.
Discount points
Loan origination fees are similar to discount points in the sense that they both increase the lender’s ___.
Yield
The IRS allows a buyer to deduct the loan origination fee. True or false?
True
The number of discount points depends on the difference between the ___ and the ___, and ___.
Interest rate and required investor yield
How long lender expects it will take borrower to pay off the loan
For borrowers, discount points are charged as ___ at the ___.
Prepaid interest
Closing
On a $100,000 loan, how much would 3 discount points be worth?
$3,000
Explanation:
$100,000 x 3% (or 0.03) = $3,000
If a house sells for $100,000, and the borrower seeks an $80,000 loan, how much would 3 discount points be worth?
$800
Explanation:
$80,000 x 3% (or 0.03) = $2,400
2,400 divided by 3 = 800
To determine how many points are charged on a loan, divide the ___ by the ___.
Total dollar amount of points by the amount of the loan
If a loan amount is $350,000 and the charge for points is $9,275, how many points are being charged?
2.65
Explanation:
$9,275 divided by $350,000 = 0.0265 or 2.65% or 2.65 points
Most mortgage loans are paid in ___ over a(n) ___.
Installment over a long period
Because most mortgage loans are paid in installments over a long period, the total ___ paid by the borrower may add up to more than the ___.
Interest paid
More than the principal amount of the loan
Because most mortgage loans are paid in installments over a long period, the total interest paid by the borrower may add up to ___ than the principal amount of the loan.
more
Lenders carefully calculate the total amount of ___ during the origination phase to determine the profitability of each loan.
Accrued interest
Lenders carefully calculate the total amount of accrued interest during the ___ to determine the profitability of each loan.
Origination phase
Lenders carefully calculate the total amount of accrued interest during the origination phase to determine the ___ of each loan.
profitability
Lenders may not charge prepayment penalties on mortgage loans that are insured or guaranteed by the ___ or on loans that have been sold to ___ or ___.
Federal government
Sold to Fannie mae or freddie mac
Lenders in IL are prohibited from charging a borrower a(n) ___ on a fixed-rate loan secured by real estate when the loan’s interest rate is greater than 8% per year.
Prepayment penalty
Lenders in IL are prohibited from charging a borrower a prepayment penalty on a fixed-rate loan secured by real estate when the loan’s interest rate is greater than ___% per year.
8%
Lenders in IL are prohibited from charging a borrower a prepayment penalty on a(n) ___ when the loan’s interest rate is greater than 8% per year.
fixed-rate loan secured by real estate
In IL, lenders can charge a prepayment penalty on a(n) ___.
Adjustable-rate loan
A note needs to be tied to either a(n) ___ or a(n) ___.
Mortgage or deed of trust
In IL, the note used to obtain money to purchase real property is usually secured by a(n) ___
Mortgage
The ___ or ___ clearly establishes that the property is security for a debt, identifies the lender and the borrower, and includes an accurate legal description of the property.
mortgage or deed of trust
The mortgage or deed of trust clearly establishes that the ___ is security for a debt, identifies the lender and the borrower, and includes an accurate legal description of the property.
property
The mortgage or deed of trust clearly establishes that the property is ___, identifies the lender and the borrower, and includes an accurate legal description of the property.
Security for debt
The mortgage or deed of trust clearly establishes that the property is security for a debt, identifies the ___ and the ___, and includes an accurate legal description of the property.
Lender and borrower
The mortgage or deed of trust clearly establishes that the property is security for a debt, identifies the lender and the borrower, and includes an accurate ___ of the property.
Legal descriotion
In states where ___ are generally preferred, foreclosure procedures are usually simpler and faster.
Deed of trust
In states where deed of trust is generally preferred, foreclosure procedures are usually ___ and ___ than mortgage loans.
simpler and faster
In IL, a deed of trust is treated like a(n) ___.
Mortgage
In IL, a deed of trust is subject to the same rules as a mortgage in regards to ___.
Forecosure
In IL, who holds the title to real estate in a deed of trust
The trustor (borrower)
Borrowers are required to pay ___ in accordance with the note’s terms, and payment of all ___ on the property.
Debt
Taxes
Borrowers are required to maintain adequate ___ to protect the lender if the property is destroyed or damaged.
Insurance
Borrowers are required to maintain adequate insurance to protect the ___ if the property is destroyed or damaged by fire, windstorm, or hazard
Lender
Borrowers are required to maintain adequate insurance to protect the lender if the property is destroyed or damaged by ___, ___, or ___.
Fire
Windstorm
Hazard
Borrowers are required to maintain the property in ___ at all times
good repair
If a borrower wishes to make any major alterations to their property, they must receive ___.
Lender authorization
Failure to pay debt on a mortgage can result in ___.
Borrower’s default
Failure to pay all real estate taxes on property can result in ___.
Borrower’s default
Failure to maintain adequate insurance to protect the lender if the property is destroyed can result in ___.
Borrower’s default
Failure to receive lender authorization before making any major alterations on the property can result in ___.
Borrower’s default
If a borrower ___, the lender has the right to foreclose.
Defaults
If a mortgage or deed of trust doesn’t have a(n) ___, the lender would have to sue the borrower every time a payment is overdue.
Acceleration clause
satisfaction of mortgage should be released in the ___ to show that the mortgage lien has been removed from the property.
public record
When real estate secured by a deed of trust has been repaid, the ___ must make a written request that the ___ convey the property back to the ___.
The beneficiary must make a written request that the trustee convey the property back to the grantor
In IL, any mortgagee, who fails to deliver a release to the mortgagor or grantor of a deed of trust within 1 month after full payment and satisfaction will be liable to pay the mortgagor or grantor a $___ penalty.
$200
In IL, when must a mortgagee deliver a release to the the mortgagor or grantor of a deed of trust in order to avoid paying them a $200 penalty?
1 month
In IL, any mortgagee, who fails to deliver a release to the mortgagor or grantor of a deed of trust within 1 month after full payment and satisfaction will be liable to pay the ___ a $200 penalty.
Mortgagee
In IL, the ___ must state “For the protection of the owner, this release shall be filed with the recorder or registrar of titles in whose office the mortgage or deed of trust was filed” in ___.
Release
Bold letters
It is the ___ responsibility to record the release of a mortgage or deed of trust.
Mortgagor
Without changing the provisions of a contract, a note may be sold to a(n) ___, such as an investor or another mortgage company.
Third party
When a mortgage is assigned, the ___ endorses the note to the third party and executes an assignment of mortgage.
Original mortgagee
When a mortgage is assigned, the ___ becomes the new owner of the debt and security interest.
Assignee
In the case of a mortgage being assigned, when the debt is satisfied, the ___ is required to execute the satisfaction (or release) of the security instrument.
Assignee
When a mortgage or trust deed loan is made, the borrower starts the reserve by depositing funds to cover the amount of __.
Unpaid real estate taxes
If a new insurance policy has just been purchased, the insurance premium reserve will be started with the deposit of ___ of the insurance premium liability.
1/12th
The borrower’s monthly loan payments include which 4 things?
Principal
Interest
Tax
Insurance
In IL, the ___ provides that except during the first year of a loan, a lender may not require an escrow accumulation of more than 150% of the previous year’s real estate taxes.
Mortgage Tax Escrow Act
In IL, the Mortgage Tax Escrow Act provides that except during the first year of a loan, a lender may not require an escrow accumulation of more than ___ of the previous year’s real estate taxes.
150%
In IL, lenders must give borrowers written notice of the ___ act’s provisions at closing.
Mortgage Tax Escrow Act
In IL, the Mortgage Escrow Account Act states that when the principal loan balance has been reduced to ___% of its original amount, borrowers may terminate their escrow account.
65%
In IL, the Mortgage Escrow Account Act states that when the principal loan balance has been reduced to 65% of its original amount, borrowers may…
terminate their escrow account
In IL, the ___ states that when the principal loan balance has been reduced to 65% of its original amount, borrowers may terminate their escrow account.
Mortgage Escrow Account Act
The IL Mortgage Escrow Account Act does not applie to loans that are insured, guaranteed, supplemented or assisted by the ___ or agencies of the ___.
State of IL
Federal government
The IL Mortgage Escrow Account Act does not applie to loans that are insured, guaranteed, supplemented or assisted by federal government agencies such as the ___ or ___.
FHA
VA
In IL, borrowers have the right to pledge an interest-bearing deposit in an amount sufficient to cover the entire amount of ___ and ___ instead of establishing an escrow account.
Anticipated future tax bills
Insurance premiums
In IL, borrowers have the right to pledge an interest-bearing deposit in an amount sufficient to cover the entire amount of anticipated future tax bills and insurance premiums instead of establishing a(n) ___.
Escrow account
The National Flood Insurance Reform Act imposes certain mandatory obligations on lenders and loan officers to set aside ___ for flood insurance on new loans.
Escrow funds
The National Flood Insurance Reform Act imposes certain mandatory obligations on lenders and loan officers to set aside escrow funds for ___ on new loans.
Flood insurance
The National Flood Insurance Reform Act imposes certain mandatory obligations on lenders and loan officers to set aside escrow funds for flood insurance on new loans. This means that if a lender or servicer discovers that a secured property is in a(n) ___, they must notify the borrower.
Flood hazard area
The National Flood Insurance Reform Act imposes certain mandatory obligations on lenders and loan officers to set aside escrow funds for flood insurance on new loans. This means that if a lender or servicer discovers that a secured property is in a flood hazard area, they must notify the ___.
borrower
If a borrower is notified that their property is in a flood hazard area, how long do they have to purchase flood insurance?
45 days
If a borrower fails to obtain flood insurance, the lender must…
Purchase flood insurance on the borrower’s behalf, and the cost may be charged to the borrower
If property involved includes rental units, the borrower may provide for rents to be assigned to the ___ in the event of the ___.
Assigned to the lender in the event of the borrower’s default
In title-theory states, lenders are automatically entitled to any rents if the ___.
Borrower defaults
When a person purchases real estate that is subject to an outstanding mortgage or deed of trust, the buyer may take the property in 1 of 2 ways. The property may be purchased ___ or the buyer may ___.
Subject to the mortgage
Assume the mortgage/ deed of trust and agree to pay the debt
A man owns an investment rental property that is mortgaged. For health reasons, he wants to sell the property to the woman who has been managing the property and who also wants to use the rental property as an investment. The owner sells the property to the woman subject to the mortgage. In the sale, the buyer takes title and assumes responsibilities for the loan, but after 2 months she can no longer make payments on the loan. There is a foreclosure sale. Because the owner sold the property subject to the mortgage, who would be liable if proceeds from the foreclosure sale did not meet the obligations?
The man
The existence of a(n) ___ does not prevent the transfer of property.
Lien
When a secured loan is assumed, the ___ or ___ must approve the assumption and release any liability of the ___ or ___.
Mortgagee or beneficiary must approve
Release any liability of the original mortgagor or trustor
Because a loan may not be assumed without ___, the lending institution would require the assumer to qualify financially.
Lender approval
Because a loan may not be assumed without lender approval, any lending institution would charge a transfer fee to cover the costs of ___.
Changing the records
Who can pay the transfer fee when a loan is assumed with lender approval?
Either the buyer or the seller
The mortgage document or deed of trust must be recorded in the…
Recorder’s office of the county where the real estate is located
Priority of mortgages and other liens normally is determined by…
The order in which they were recorded
Because second loans represent greater risk to the lender, they are usually issued at…
higher interest rates
If the buyer defaults in a land contract, and the buyer has 20% equity in the property and a contract in excess of 5 years, ___ is necessary in order for the seller to evict them.
Judicial foreclosure
If the buyer defaults in a land contract, and the buyer has ___% equity in the property and a contract in excess of ___ years, judicial foreclosure is necessary in order for the seller to evict them.
20%
5 years
Predatory loans often result in ___.
Foreclosure
Equifax considers an individual with a credit score below ___ as a candidate for a subprime loan
650
What are the 2 distinct areas for mortgage fraud?
1) Fraud for profit
2) Fraud for housing
Area of mortgage fraud in which an individual or individuals use the lending process to steal cash and equity from homeowners and lenders.
Fraud for profit
Area of mortgage fraud that involves the illegal actions of a borrower to take, acquire, or maintain ownership of a property.
Fraud for housing
Falsifying employment records or pay stubs, buying into other people’s bank accounts or credit scores, or lying about occupancy to obtain a lower interest rate are examples of what area of mortgage fraud?
Fraud for housing
A licensee who becomes aware that a client or customer is perpetrating fraud should contact the ___.
Lender
Receipt of ___ from a transaction as a result of mortgage fraud could be construed as complicit behavior.
Commission
Doctrines of property law, known as “___”, spell out basic interests that the mortgagor and mortgagee have in property.
Theories
In ___ states, the mortgagor gives legal title to the mortgagee and retains equitable title.
Title theory
In title theory states, the ___ gives legal title to the ___ and retains equitable title.
Mortgagor gives legal title to the mortgagee
In title theory states, the mortgagor gives legal title to the mortgagee and retains ___.
Equitable title
In title theory states, ___ is returned to the mortgagor when debt is paid in full.
Legal title
In title theory states, legal title is returned to the ___ when debt is paid in full.
Mortgagor
In title theory states, the ___ owns the property until the debt is paid.
lender
In title theory states, the lender own s the property until…
The debt is paid
In title theory states, the ___ has the right to immediate possession if the mortgagor defaults.
Lender
In title theory states, the ___ has all the usual rights of ownership, even though they don’t hold legal title.
Borrower
In title theory states, the lender has the right to __ of real estate and rents from the mortgaged property if the mortgagor defaults.
Immediate possession
In title theory states, the lender has the right to immediate possession of real estate and rents from the mortgaged property if…
the mortgagor defaults
In ___ states, the mortgagor holds both legal and equitable title.
Lien theory
In lien theory states, the ___ holds both legal and equitable title.
Mortgagor
In lien theory states, the mortgagor holds both ___ and ___.
Legal title
Equitable title
In lien theory states, the ___ simply has a lien on the property as security for the mortgage debt, and the mortgage is nothing more than collateral for the loan.
Mortgagee
In lien theory states, the mortgagee simply has a(n) ___ on the property as security for the mortgage debt, and the mortgage is nothing more than collateral for the loan.
lien
In lien theory states, the mortgagee simply has a lien on the property as security for the mortgage debt, and the mortgage is nothing more than ___.
collateral for the loan
In lien theory states, if the mortgagor defaults, the mortgagee must go through a(n) ___ to obtain legal title.
Formal foreclosure proceeding
Illinois is a(n) ___ theory state.
Intermediate mortgage theory
Mortgages and trust eeds in IL convey only ___ to the lender as security for the loan during the existence of debt.
Qualified title
Because IL is an intermediate mortgage theory state, the ___ remains the owner of the mortgaged property for all beneficial purposes subject to the lien.
Mortgagor (borrower)
What are the 3 general types of foreclosure proceedings?
1) Nonjudicial
2) Judicial
3) Strict foreclosure
Some states allow ___ foreclosure procedures to be used when the security instrument contains a power-of-sale clause.
Nonjudicial
In ___ foreclosure, no court action is required.
nonjudicial
Some states allow nonjudicial foreclosure procedures to be used when the security instrument contains a(n) ___.
power-of-sale clause
In IL, by statute, mortgage foreclosures may be brought about only through a(n) ___.
court proceeding
Illinois is classified as a(n) ___ foreclosure state.
Judicial
Under the IL Mortgage foreclosure law, the term ___ includes deeds of trust, installment contracts, certain colatteral assignments of beneficial interest in land trusts, and traditional mortgage instruments.
Mortgage
In strict foreclosure, a(n) ___ does NOT take place.
Sale
The major disadvantage of the ___ is that the mortgagee takes the real estate subject to all junior liens
Deed in Lieu of Foreclosure
By accepting a(n) ___, the lender usually loses any rights pertaining to FHA or private mortgage insurance or VA guarantees.
Deed in Lieu of foreclosure
Illinois has a(n) ___, which allows the borrower to pay the lender the amount in default plus costs and thereby extinguish the debt
equitable right of redemption
The equitable right of redemption begins after the ___ but before the ___.
After the foreclosure notice
Before the foreclosure sale
In IL, a mortgagor in default who wishes to exercise the equitable right of redemption may do so for a period of ___ after the date of service on the mortgagor or after the first ___ date, whichever is ___.
Seven months
Publication date
Later
In IL, the mortgagor can still retain possession of the property after an entry of foreclosure judgement through the ___ day after confirmation of sale.
30th
In IL, on the 31st days after judgment of foreclosure, they must have ___ or be subject to ___
vacated the property
eviction
In IL, the purchaser of a foreclosed home receives a quitclaim deed called a(n) ___.
Sheriff’s deed
In IL, the mortgagor has the right to exercise their statutory right of reinstatement for a period of ___ days after service of summons or publication date.
90
In IL, the statutory right of reinstatement may be exercised once every ___ years.
5
In IL, after statutory right of reinstatement occurs, the suit must be ___ by the lender, and the mortgage remains in ___.
dismissed
effect
In IL, if a default is not cured by redemption or reinstatement, the entry of a decree of foreclosure will lead to a(n) ___ of the property usually called a(n) ___.
Judicial sale
sheriff’s sale
The successful bidder at a sheriff’s sale receives a(n) ___ instead of a deed.
Certificate of sale
When will a successful bidder at a sheriff’s sale receive a sheriff’s deed?
After the sale is confirmed by the court
A(n) ___ most often occurs when the owner/borrower is unable to make the mortgage payments and cannot sell the house for what is owed on the property.
Short sale
In a(n) ___, the lender agrees to accept less because the lender may lose more money by acquiring the property through a foreclosure process and then holding the property until another buyer is found
Short sale
Any discussion a licensee has with a consumer over foreclosure and bankruptcy should involve advising the consumer to seek…
Legal advice
In a chapter 7 bankruptcy, the sale will be ___.
postponed
A chapter 13 bankruptcy allows the mortgagor to pay off the ___ over the length of the ___, however they will also need to meet ___.
pay off the late unpaid payments over the length of the repayment plan, will still need to meet current mortgage payments
___ loans involve a borrower and lender
Mortgage
___ loans involve a 3rd party manager (trustee), borrower (trustor), and lender (beneficiary)
Deed of trust
Default by the borrower may result in ___, ___, and ___.
Acceleration of payments
Foreclosure sale
Loss of title
A deed in lieu of foreclosure does not eliminate ___ and is still a(n) ___ in the borrower’s credit history
Junior liens
Adverse element
Illinois is a(n) ___ mortgage theory state
Intermediate
In IL, what is the usury limit on the rate that may be charged for a loan secured by real estate and made by private lenders?
no state imposted usury limit
In IL, the ___ gives borrowers certain protections by limiting the size of escrow accounts and permitting alternatives to escrow
Mortgage Escrow Account Act
IL does not have ___ right of redemption.
Statutory
IL has ___ right of redemption.
Equitable
IL has statutory right of ___.
Reinstatement
