Real Estate Loans and Mortgages

Question 1

What is a financial institution whose primary function is to promote thrift and homeownership?

Answer 1

A savings and loan association (“savings banks” or “thrifts”)

Question 2

What is a financial institution that is designed to act as a depository for funds and as a lender for commercial activities?

Answer 2

A commercial bank

Question 3

Commercial banks primarily do what?

Answer 3

Short term loans, including construction loans, home improvement loans, and manufactured housing loans

Question 4

What are nonprofit financial institutions into which members place their money, usually through direct deposit?

Answer 4

Credit unions

Question 5

Why don’t credit unions pay income tax?

Answer 5

So they can pay higher interest rates on deposits than other savings institutions

Question 6

Loans with credit unions are mostly _

Answer 6

Short-term loans

Question 7

What real estate loans do credit unions tend to make?

Answer 7

Second mortgage or home improvement loans

Question 8

Who holds a major portion of the savings of the American public?

Answer 8

Life insurance companies

Question 9

What does REIT stand for?

Answer 9

Real Estate Investment Trust

Question 10

Why was REIT formed?

Answer 10

The Real Estate Investment Trust was formed with the goal of influencing small investors to combine their resources with others to raise venture capital for real estate transactions

Question 11

Loan departments act as _

Answer 11

Mortgage bankers

Question 12

What does the secondary mortgage market consist of?

Answer 12

Holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors

Question 13

What is a mortgage?

Answer 13

A mortgage is a financing instrument that creates a lien against a property

Question 14

Who is the mortgagee?

Answer 14

The lender who gives the money

Question 15

Who is the mortgagor?

Answer 15

The borrower who gives the mortgage

Question 16

What provisions should be included in a document? There are 11 items

Answer 16

1. ID of participants
2. Property description
3. Attachment of note
4. Property taxes
5. Insurance
6. Preservation and Maintenance of property
7. Defeasance clause
8. Acceleration clause
9. Signatures and acknowledgment
10. Prepayment penalty
11. Due-on-sale clause

Question 17

What 4 parts make up a monthly mortgage payment?

Answer 17

Principal, interest, taxes, and insurance (PITI)

Question 18

Does the lender have the right to bring legal action to the purchaser for defaulting?

Answer 18

Yes

Question 19

Explain what a judicial foreclosure does

Answer 19

Judicial foreclosure allows the sale of the mortgaged property under the supervision of the court, with the proceeds going first to satisfy the mortgage, then other lien holders, and finally the borrower if any proceeds are left.

Question 20

What does a non-judicial foreclosure do?

Answer 20

Non-judicial foreclosure is the process whereby the lender gives the borrower a notice of default (NOD) and the intent to sell the property in a form prescribed by that state’s statute.

Question 21

What is a deed in lieu of foreclosure?

Answer 21

transfers legal title to the lender. The transfer, however, does not terminate any existing liens on the property.

Question 22

What is the borrower’s right of redemption?

Answer 22

is the right to reclaim a property that has been foreclosed by paying off amounts owed to creditors, including interest and costs.

Question 23

What is a deficiency judgment?

Answer 23

This enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.

Question 24

What other fees do lenders charge to increase their investment?

Answer 24

Loan origination fees and points/discount fees

Question 25

Besides paying the mortgage, what responsibilities does the mortgagor have?

Answer 25

Keeping the property in good repair, paying all the property taxes and any assessments in a timely manner, protecting the property from loss due to fire or other untimely disaster by purchasing or maintaining the appropriate insurance