RES EXPRESS Flashcards
RESPA would prohibit which of the following acts?
Steering
Paying of kickbacks
Blockbusting
Redlining
PAYING OF KICKBACKS
RESPA concerns itself only with educating consumers about the true costs of borrowing and standardizing lending practices. As such, referral “fees” are prohibited.
A buyer assumes the mortgage. How is the owner relieved of the liability?
Subject to mortgage
Novation (or “full assumption)
Substitution
Graduation
Novation (or “full assumption)
Essentially, novation means to substitute a new contract for an old one; thus the holder of the original is relieved of his or her responsibilities.
Which of the following is true if a Residential Contract to Buy and Sell form is marked to indicate the “Liquidated Damages” choice in case the buyer is in default?
Seller may keep earnest money and also sue for actual damages resulting from the buyer’s default.
Buyer may cure the default by offering money.
Earnest money and any other payments or things of value received from the buyer will be kept by the seller as seller’s sole remedy for buyer’s default.
Seller may be able to sue to force the buyer to perform under the contract.
EARNEST MONEY AND ANY OTHER PAYMENTS OR THINGS OF VALUE RECEIVED FROM THE BUYER WILL BE KEPT BY THE SELLER AS SELLER’S SOLE REMEMDY FOR BUYER’S DEFAULT
The seller may keep the earnest money and any other payments received from the buyer but has no other options. Liquidated damages are defined as a predetermined sum that becomes the seller’s sole and only remedy for default by the buyer.
What is the primary difference between the Commission-approved deed of trust forms?
Forms contain different provisions for assumption of the loan upon sale of the property.
Forms are specific for public trustee or private trustee transactions.
Forms are specific for residential, agricultural, and investment loans.
Forms contain different provisions depending on the loan program to be used for funding the loan.
FORMS CONTAIN DIFFERENT PROVISIONS FOR ASSUMPTION OF THE LOAN UPON SALE OF THE PROPERTY
The forms contain different provisions for assumption of the loan upon sale of the property. Three versions are approved: Strict Due on Sale, Qualified Assumption, and Feely Assumable upon Sale of the Property.
Which of the following is TRUE if no box is checked for the Appraisal Condition section of the Residential Contract to Buy and Sell?
The form has been improperly completed.
The buyer will be released from the contract if a new loan is refused due to a low appraisal.
The seller will have the ability to terminate the contract if the appraisal is substantially higher than the selling price.
The buyer will be able to obtain a VA or FHA loan, but the loan will not be subject to the appraisal.
THE FORM HAS BEEN IMPROPERLY COMPLETED
At least 1 option should be checked or the form has been improperly completed. Either the appraisal provision is to be waived, or it will apply to a specific loan or to the buyer’s evaluation of a cash purchase or loan assumption.
Andrew is selling his property and has no knowledge of any plumbing system problems. In fact the pipes are corroded and will require replacement very soon. How should Andrew respond in the seller’s property disclosure when asked if the seller has any knowledge of plumbing system problems?
Yes
No
I don’t know
The seller would not be the one required to respond to this question.
NO
Andrew should answer “No” because he has no knowledge of any problems at the time he completed the form.
When the lender under a deed of trust requires title insurance, who would be the most likely person to pay for it?
The mortgagee
The trustee
The trustor
The beneficiary
THE TRUSTOR
“Trustor” is another name for the borrower and “trustee” is a “supposedly” neutral third party who holds naked legal title, the right to foreclose at the instructions of the beneficiary for non-payment of a promissory note. The beneficiary is the lender in a Deed of Trust. Even though it’s the lender who requires the insurance to protect his/her position, it’s the borrower who pays for it.
Usury MOST nearly means
making loans without the benefit of co-signors.
lending money at fluctuating interest rates.
redlining.
illegal interest.
ILLEGAL INTEREST
Each state sets its own ceiling for the maximum interest rate lenders may charge. Rates above that ceiling are considered usurious and illegal. No reputable lender exceeds those rates and those that make a practice of it are commonly known as loan sharks.
All of the following are true of conventional loans except what?
They are made to the buyer without governmental insurance or guarantee.
The policy requirements of the lenders are not uniform.
The qualification requirements are uniformly fixed by state law.
They require a higher down payment than non-conventional loans.
The qualification requirements are uniformly fixed by state law.
Not only are guidelines not uniform, qualification standards can vary enormously from lender to lender. There are no state-mandated qualifying requirements for conventional loans.
A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called
blanket financing.
package financing.
warehousing.
discounting.
WAREHOUSING
Warehousing refers to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market. The “warehousing” occurs when individual loans are bundled, often with a common element such as the size of the mortgage or credit worthiness of the borrowers, and sold as a single unit.
The maximum permissible amounts are based on “loan to value ratios”
based on sale price or appraised value, whichever is lower.
not determined by federal statute in the case of FHA loans.
based on the banker’s competitive market analysis.
fixed by law for conventional loans.
BASED ON SALE PRICE OR APPRAISED VALUE, WHICHEVER IS LOWER
Although various banks, mortgage companies and programs have different LTVs, the lower, more conservative number is used.
In the section on Purchase Price and Terms in a Mandatory Residential Contract to Buy and Sell, which of the following is TRUE concerning the entry for cash at closing?
It represents the total amount the buyer should plan to bring to closing.
It should match the good-faith estimate provided with the HUD-1 form.
It represents the approximate amount the seller will receive at closing.
It does not include the buyer’s closing costs, such as loan fees.
IT DOES NOT INCLUDE THE BUYERS CLOSING COSTSM SUCH AS LOAN FEES
The line item of cash at closing is entered in order to complete the math showing the sources of funds that equal the total purchase price. The amount does not include closing costs or new loan fees and is not intended to represent final figures.
Which type of loan will result in the largest reduction of the principal balance most quickly?
- 5% over 30 years
- 75% over 20 years
6% over 15 years
7% over 20 years
6% OVER 15 YEARS
The shorter the term of a loan, the more quickly principal is paid down and the faster equity builds. A 15-year loan at 6% interest rate would provide the LARGEST and FASTEST reduction in the principal. Interestingly, the payments on a 15-year loan are often not that much higher than the same loan with a 30-year payback.
The inspection provision of the Residential Contract to Buy and Sell allows the buyer to terminate the contract in which of the following situations?
If the property is unsatisfactory in the buyer’s subjective discretion.
If the seller refuses to correct certain defects in which case the buyer may do so immediately.
Only if a licensed inspector determines that there are significant problems with the property.
Only after listing unsatisfactory conditions that cause the buyer to terminate.
IF THE PROPERTY IS UNSATISFACTORY IN THE BUYERS SUBJECTIVE DISCRETION
The buyer solely determines the conditions a seller must correct. A Resolution Deadline is set, by which time the seller must correct the conditions; 1 day after that deadline, the contract will terminate automatically unless the buyer withdraws the objections.
The amount of earnest money deposit is determined by
the real estate licensing statutes.
an agreement between the parties.
the broker’s office policy on such matters.
the acceptable minimum of 5 percent of the purchase price.
AN AGREEMENT BETWEEN THE PARTIES
Earnest money is a demonstration of sincerity on the part of the purchaser and provides preliminary evidence that he or she is financially capable of completing the transaction. While it should be substantial enough to meet these two criteria, there is no set or customary amount or percentage.
The Closing Disclosure (CD) form is
the document used to make Fair Housing complaints.
provided after signing a listing agreement.
a statement of actual charges and adjustments.
the document that must be displayed in brokerages.
a statement of actual charges and adjustments.
The Closing Disclosure (CD) is a standard form in use which is used to itemize services and fees charged to the borrower by the lender. The form is called for in the TILA RESPA Integrated Disclosure (TRID).
A tenant leased 3,000 square feet at $10 per square foot and 8% of gross income. The total annual rent she paid was $60,000. What was the gross income on which she paid percentage rent?
$120,000
$160,000
$300,000
$375,000
375000
At $10 per square foot, the tenant’s base rent is $30,000. Since the total rent was $60,000, that means the remaining $30,000 was due to the gross sales percentage. Since that figure is 8%, simply divide $30,000 by .08 to arrive at $375,000.
Owner Grace’s property has been foreclosed. After the property was sold for $340,000, she still owed $60,000 to the lender. The lender may be able to get a personal judgment against Grace for the $60,000. This is called a
leverage lien.
partition lawsuit.
reverse foreclosure judgment.
deficiency judgment.
DEFICIENCY JUDGEMENT
A deficiency judgment enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.The lender’s ability to pursue such a judgment may be limited, however.
Which of the following is NOT a closing document?
Agent-Seller Agreement
Sales Contract
Deed of Trust
AGENT-SELLER AGREEMENT