Real Estate Finance Flashcards
Stipulation in a mortgage that the entire unpaid balance of the debt may become due and payable if a default of expressed conditions should occur.
acceleration clause
A financing technique in which the lender can raise or lower the interest rate according to a set index.
adjustable-rate mortgage ( ARM )
A loan characterized by payment of a debt by regular installment payments.
amortized mortgage
The buyer of real property that is already mortgaged assumes liability for the mortgage payments of the original loan that remains on the property.
assumption
A single, large payment made at maturity of a partially amortized mortgage to pay off the debt in full.
balloon payment
A mortgage loan amortized the same way as other loans with monthly payments, except that the borrower makes a payment every two weeks.
biweekly mortgage
One debt instrument covering two or more parcels.
blanket mortgages
A financing technique wherein the seller agrees to deliver the deed at some future date and the buyer takes possession while paying the agreed amount (also called land contract, an installment sale contract, and an agreement for deed).
contract for deed
mortgage that has no direct federal involvement (even though it may be made by a federally chartered lender) is called
a conventional loan
A friendly foreclosure (nonjudicial procedure) in which the mortgagor gives title to the mortgagee.
deed in lieu of foreclosure
A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby defeat the mortgage.
defeasance clause
A provision in a conventional mortgage that entitles the lender to require the entire loan balance to be paid in full if the property is sold.
alienation clause or due-on-sale clause
That portion of a VA-guaranteed loan that protects the lender if the borrower defaults.
entitlement
The right of a mortgagor, before a foreclosure sale, to reclaim forfeit property by paying the entire indebtedness.
equity of redemption
A written statement that bars the signer from making a claim inconsistent with the instrument (commonly used with a mortgage assumption).
estoppel certificate
A mortgage secured by a personal residence. It provides a line of credit available for draws when needed by the homeowner. It is sometimes used as a home improvement loan.
home equity loans
To pledge real or personal property as security for a debt or obligation without giving up possession of the property.
hypothecation
The variable component that is added to the margin to calculate the interest rate in an adjustable rate mortgage.
index
Relationship between amount borrowed and appraised value (or sale price) of a property.
loan-to-value ( LTV ) ratio
The fixed component that is added to the index to calculate the interest rate in an adjustable rate mortgage.
margin
A written agreement that pledges property as security for payment of a debt.
mortgage
A lender who holds a mortgage on specific property as security for the money loaned to the borrower.
mortgagee
Fee paid by FHA borrowers to obtain a loan (upfront and annual).
mortgage insurance premium ( MIP )
A borrower who gives a mortgage on the borrower’s property in order to obtain a loan from a lender.
mortgagor
A financing arrangement whereby monthly mortgage payments are less than required to pay both interest and principal. The unpaid amount is added to the loan balance.
negative amortization
(Jumbo loans) are not marketable, but they may be held in the lender’s investment portfolio, along with other loans the lender may have made that don’t meet the underwriting guidelines of FHA, VA, or Fannie Mae/Freddie Mac
Nonconforming loan
A loan covering both real and personal property.
package loan
This clause permits the borrower to obtain the release of any one lot or parcel from the blanket lien by repaying a certain amount of the loan
partial release clause
A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.
prepayment clause
The amount set by the creditor that the debtor is charged for retiring the debt early.
prepayment penalty
A note secured by a mortgage or deed of trust given by a buyer as borrower to a seller, as lender, as part of the purchase price of the real estate
purchase-money mortgage (PMM)
A certificate issued by the lender when the debt obligation is paid in full.
satisfaction of mortgage
A provision in a mortgage in which the lender voluntarily permits a prior or subsequent mortgage to take priority over the lender’s otherwise superior mortgage; the act of yielding priority.
subordination clause
A written agreement between holders of liens on a property that changes the priority of mortgage, judgement and other liens under certain circumstances
Subordination agreement
- In a fully amortized, level-payment plan mortgage, the portion of the monthly payment that goes to reducing the principal.
a. remains constant throughout the loan term.
b. gradually increases with each payment throughout the duration of the loan term.
c. gradually decreases with each payment throughout the duration of the loan term.
d. fluctuates based on the prevailing interest rates.
B
- A financing vehicle in which the vendor holds title to the property until the buyer has met the stated obligations is a
a. balloon mortgage.
b. purchase-money mortgage.
c. contract for deed.
d. term mortgage.
C
- In title theory states, the mortgage clause that provides that the conveyance of title to the lender is defeated when all of the terms of the agreement have been fulfilled is the
a. penalty clause.
b. release clause.
c. defeasance clause.
d. insurance clause.
C
- If a foreclosed property fails to bring sufficient proceeds at the foreclosure sale to pay the debt, the lender
a. must absorb the loss as a bad investment.
b. may seek recovery of the loss from the Real Estate Recovery Fund.
c. may obtain an interpleader judgement for the amount of deficit.
d. may obtain a deficiency judgement for the amount of deficit.
D
- A home was purchased with a down payment of $500,000 and a loan of $200,000 at 6 percent interest for 20 years. Monthly payments are $1,432.86. What is the loan-to-value ratio?
a. 25 percent
b. 70 percent
c. 75 percent
d. 80 percent
D
I DON’T GET THIS ONE!!!
- Which is considered an advantage of home equity loans?
a. The interest rate is typically lower than the prevailing home mortgage rate.
b. Home equity loans do not create a lien against the borrower’s residence.
c. The interest on most home equity loans is tax deductible.
d. All of the above are considered home equity loan advantages.
C
- The current maximum FHA loan available for a single-family dwelling is
a. dependent on location.
b. $108,000.
c. $203,000.
d. $417,000.
A
- The maximum amount of a VA loan is
a. $417,000.
b. $104,250.
c. $89.912.
d. not a legislated limit for qualified borrowers.
D
- A man wants to buy a small restaurant and is considering financing the restaurant equipment in addition to the real estate. If the man pledges the personal property in addition to the real estate as collateral for the mortgage, the man’s mortgage is
a. an equipment mortgage.
b. a package mortgage.
c. an all-inclusive mortgage.
d. a chattel mortgage.
B
- A borrower who is in default on a mortgage is allowed to prevent the lender from foreclosing on the property by paying the mortgagee the delinquent principal and interest, plus any expenses the mortgagee has incurred in attempting to collect the payments.
a. novation.
b. a satisfaction of mortgage.
c. the equity to redemption.
d. an acceleration clause.
C
- A lender declares all the unpaid balance due and payable as a result of default. The lender is exercising the
a. acceleration clause.
b. due-on-sale clause.
c. defeasance clause.
d. escalator clause.
A
- The person who borrows money to help pay for the purchase or real property is called at various times the
a. lender.
b. mortgagee.
c. lienor.
d. mortgagor.
D
- A mortgage
a. creates a lien.
b. is a contract.
c. must be in writing.
d. has all the above characteristics.
D
- When a vendee buys “subject to the mortgage,” the
a. vendee becomes responsible for the note.
b. original obligation is substituted with a new note by novation.
c. vendor is relieved of the obligation for the promissory note.
d. vendor remains responsible for the note.
D
- Blanket mortgages
a. are illegal.
b. typically include a partial release clause.
c. include equipment and other personal property.
d. have all the above traits.
B
- A couple has just made the final mortgage payment on their home. What document must the mortgagee file on their behalf?
a. Liz pendens
b. Novation
c. Satisfaction of mortgage
d. Estoppel certificate
C
- A new mortgage accepted by the seller as part of the purchase price is
a. a wraparound mortgage.
b. a shared-appreciation mortgage.
c. an assumption of the mortgage.
d. a purchase-money mortgage.
D
- If a mortgagee does NOT want the mortgage to be paid ahead of schedule, the mortgage will normally contain
a. a prepayment penalty clause.
b. a redemption clause.
c. a defeasance clause.
d. an acceleration clause.
A
- A mortgagor defaulted on a mortgage encumbering an apartment complex. Once the foreclosure proceedings were filed, the lender appealed to the courts to appoint
a. a receiver.
b. an on-site manager.
c. an attorney to handle the case.
d. an arbitrator.
A
- Which statement is TRUE regarding the mortgagor’s minimum cash investment on an FHA loan?
a. Closing costs paid by the buyer may be applied toward satisfying the cash requirement.
b. Seller-paid closing costs may be included when calculating the cash investment amount.
c. A loan from the seller may be used to satisfy the cash requirement.
d. A gift from a relative may be used to satisfy the cash requirement.
D
- A potential FHA borrower’s monthly housing expenses is $504, the total monthly gross income is $1,800, and the total monthly obligations are $648. What is the monthly housing expense ratio for the borrower?
28 Percent
- The loan-to-value ratio is 80 percent. A buyer wants to acquire a property with a purchase price of $116,000. Calculate the required down payment.
$23,200
- Which expense is NOT charged to FHA borrowers?
a. Annual mortgage insurance premium
b. Up-front mortgage insurance premium
c. Funding fee
d. All of the above expenses are charged to FHA borrowers.
C
Enables a borrower with an existing mortgage loan to obtain additional financing from a second lender without paying off the first loan
Wraparound loan
