RE-9-M

Question 1

A promissory note:

Answer 1

is evidence of a debt.

Question 2

All of the following are negotiable instruments except a(n

a. personal check.
b. promissory note.
c. installment note.
d. trust deed securing a promissory note.

Answer 2

d. trust deed securing a promissory note.

Question 3

Which of the following statements is correct regarding effective interest rate and
nominal interest rate?
a. The effective interest rate is slightly above the average rate in the marketplace; the nominal interest rate is slightly below.
b. The effective interest rate is the rate actually paid by the borrower; the nominal interest rate is the rate named in the note.
c. The effective interest rate is the rate named in the contract; the nominal interest rate is the average rate in the marketplace.
d. None of the above

Answer 3

b. The effective interest rate is the rate actually paid by the borrower; the nominal interest rate is the rate named in the note.

Question 4

If the payments on a loan financing a real estate purchase are insufficient to service the debt, the result will be:

a. a smaller balloon payment.
b. negative amortization.
c. positive cash flow.
d. default on the debt.

Answer 4

b. negative amortization.

Question 5

Which of the following will necessarily involve a balloon payment?

a. Fully amortized loan
b. Partially amortized loan
c. Variable rate loan
d. Fixed rate loan

Answer 5

b. Partially amortized loan

Question 6

When compared to a 25-year amortized loan, a 30-year amortized loan has:

a. less interest over the term of the loan.
b. more principal over the term of the loan.
c. higher monthly payments of principal and interest.
d. lower monthly payments of principal and interest.

Answer 6

d. lower monthly payments of principal and interest.

Question 7

Which of the following statements best defines a mortgage loan?

a. A loan secured by a mortgage on real estate
b. Any means of creating a trusteeship
c. An unsecured loan in which the mortgage itself serves as collateral
d. None of the above

Answer 7

a. A loan secured by a mortgage on real estate

Question 8

In a deed of trust, the power of sale in the event of default is given from the:

a. beneficiary to the trustee. b. buyer to the seller.
c. trustor to the trustee.
d. trustee to the beneficiary.

Answer 8

c. trustor to the trustee.

Question 9

A power of sale or trustee’s sale foreclosure of a deed of trust:

a. is similar to a court foreclosure.
b. prohibits a deficiency judgment.
c. allows for no reinstatement period.
d. gives the trustor rights of redemption.

Answer 9

b. prohibits a deficiency judgment.

Question 10

Mortgages and trust deeds are different in all of the following respects, except:

a. parties.
b. security.
c. statute of limitations.
d. title.

Answer 10

b. security.

Question 11

In the case of a contract of sale, the best analogy for the financial relationship of the parties is:

a. landlord-tenant.
b. beneficiary-trustor.
c. optionor-optionee.
d. grantor-grantee

Answer 11

b. beneficiary-trustor.

Question 12

Adding an acceleration clause to a note would:

a. not make the note less negotiable.
b. be of no benefit to the holder.
c. make the note nonnegotiable.
d. greatly limit the negotiability of the note.

Answer 12

a. not make the note less negotiable.

Question 13

Foreclosure of a deed of trust may be accomplished either by court action or by power of sale. Foreclosure by court action:

a. is not a remedy available in California.
b. prohibits a deficiency judgment.
c. usually establishes a right-of-redemption period.
d. is identical to foreclosure by trustee sale.

Answer 13

c. usually establishes a right-of-redemption period.

Question 14

When real property subject to a mortgage is foreclosed judicially, the mortgagor may remain in possession of the property for what maximum amount of time after the foreclosure of the sale?
a. 30 days b. 90 days c. 180 days d. one year

Answer 14

d. one year

Question 15

A broker sells a property and negotiates a first loan from a bank and a second loan from a seller. The broker would record a Request for Notice of Default for the protection of the ______ loan.

a. beneficiary of the first
b. beneficiary of the second
c. trustor of the first
d. trustee of the first

Answer 15

b. beneficiary of the second

Question 16

Buyer Taylor purchases a home from seller Sanders and agrees to assume an existing conventional loan. The lender agrees to the assumption and signs a substitution of liability. Under these circumstances:

a. Taylor becomes primarily responsible for the loan, and Sanders remains liable as a surety.
b. Sanders remains primarily responsible for the loan, and Taylor becomes secondarily liable.
c. Sanders is relieved from all liability.
d. the loan may not be secured by a purchase-money deed of trust.

Answer 16

c. Sanders is relieved from all liability.

Question 17

The main purpose of the FHA was to:

a. help stabilize the housing market.
b. promote homeownership by insuring home loans.
c. raise building standards on a national basis.
d. provide a source of home-loan funds at low rates.

Answer 17

b. promote homeownership by insuring home loans.

Question 18

For an FHA insured loan, the interest rate is:

a. set by market conditions.
b. set by the FHA.
c. determined by agreement between the borrower and lender. d. set by the borrower only

Answer 18

c. determined by agreement between the borrower

Question 19

Rose, a prospective home buyer, asked Steve at ABC Real Estate Brokerage Company to help her get FHA financing. The broker would most likely contact:

a. a mutual mortgage insurer.
b. the Federal Reserve Bank
c. the Federal Housing Administration.
d. an approved mortgagee.

Answer 19

d. an approved mortgagee.

Question 20

One of the special features of VA financing is that:

a. the down payment cannot exceed 3% of the assessed value.
b. the down payment varies with the property value.
c. the down payment is determined by the CRV.
d. there is no down payment if the selling price does not exceed the CRV.

Answer 20

d. there is no down payment if the selling price does not exceed the CRV.

Question 21

Which of the following statements is not correct regarding land contracts?

a. The buyer has equitable ownership of the property. b. The buyer has possession of the property.
c. The seller has legal title of the property.
d. The seller is known as the vendee.

Answer 21

d. The seller is known as the vendee.

Question 22

deed of trust and note are given to a seller to finance the purchase of vacant land. The buyer intends to place a short-term construction loan on the land. Such a deed of trust is most likely to include a(n) ���������clause.

a. subrogation b. or more
c. subordination d. prepayment

Answer 22

c. subordination

Question 23

Which of the following is true regarding a hard-money second deed of trust?

a. It is a real property purchase loan.
b. It has the highest possible lien priority.
c. Through this type of deed, equity in real property is the collateral for a cash loan.
d. It cannot be used to purchase personal property.

Answer 23

c.Through this type of deed, equity in real property is the collateral for a cash loan.

Question 24

Mike borrowed money from Robert. As security for the loan, Mike gave Robert a trust deed covering six separate parcels of previously unencumbered real property that Mike owned. Such a trust deed would be regarded as a(n) _______ trust deed.

a. blanket
b. subordinated
c. all-inclusive
d. purchase-money

Answer 24

a. blanket

Question 25

Which of the following terms are most nearly identical?

a. Takeout loan/deficit financing
b. Takeout loan/interim loan
c. Construction loan/take-out loan
d. Construction loan/interim loan

Answer 25

d. Construction loan/interim loan