Unit 12 Real Estate Financing Principles

Question 1

What is a mortgage?

Answer 1

A lien or charge on the property of a debtor called the mortgagor

Question 2

What is the borrower or mortgager?

receives a loan and in return gives a note and mortgage to the lender called the _______

Answer 2

Mortgagee

Question 3

When the loan is paid in full, the mortgagee issues a….

Answer 3

satisfaction of mortgage

Question 4

What happens if the debtor defaults?

Answer 4

The lender can sue on the note and foreclose on the mortgage

Question 5

What kind of lien is a mortgage?

Answer 5

Specific, voluntary lien

Question 6

In title theory states, what does the mortgagor give and retain?

Answer 6

Gives the legal title to the mortgagee and

Retains equitable title

Question 7

When does the Legal title returned to the mortgagor?

Answer 7

When the debt is paid in full

Question 8

The lender allows the borrower all of the usual rights of ownership including…

Answer 8

possession and use.

Question 9

Because the lender holds legal title, the lender has rights to

Answer 9

immediate possession of the mortgaged property if they default

Question 10

In a lien theory statem the mortgagor holds..

Answer 10

the legal and equitable title

Question 11

The mortgagee merely has a lien on the property as security for the

Answer 11

mortgage debt

Question 12

The mortgage, or deed of trust, is nothing more than ___ for the loan

Answer 12

collateral

Question 13

if the mortgagor defaults, the mortgagee must go through..

Answer 13

formal foreclosure proceeding to obtain legal title

Question 14

The property is offered for sale at public auctions, and the funds from the sale are used to…

Answer 14

pay the balance of the remaining debt.

Question 15

A borrowoer who fails to redeem the property during a redemption period loses the property..

Answer 15

permamently.

Question 16

Can the owner of a fee simple estate mortgage the fee simple estate?

Answer 16

The owner of a fee simple estate can mortgage the fee simple estate

Question 17

The leasehold or sub leasehold estate can mortgage the

Answer 17

estate interest

Question 18

THe owner of a condominium unit can mortgage the ______ in the condomininium

Answer 18

fee interest

Question 19

The owner of a cooperative interest may be able to offer that ______ ____ ____ as a collateral for a loan

Answer 19

Personal property interest

Question 20

In a creditor.debtor loan relationship, the creditor loans the debtor money for a purpose, and the debtor agrees to pay the

Answer 20

principle and interest that was agreed upon schedule

Question 21

The debtor agrees to offer some property or other collateral to the creditor if the loan is not repaid although this is not a

Answer 21

requirement of all loans

Question 22

mortgage loans are secured loans

Answer 22

true

Question 23

What are the two parts of a mortgage loan?

Answer 23

The debt itself

The security for the debt

Question 24

When the property is mortgaged, the owner must

Answer 24

execute a promissory note which indicates the amount borrowed and the loan terms, and a security document specifying the collateral used to secure the loan

Question 25

What is hypothecation

Answer 25

A pledge

When obtaining a mortgage, the borrower is required to pledge specific real property as security or collateral for the loan.

The debtor retains possession and control of the property while the creditor receives an underlying equitable right in the pledged property.

The right to foreclose on the pledged property in the event a borrower default is contained in the security agreement such as a mortgage or deed of trust.

Question 26

What is the promissory note?

Answer 26

The promissory note, also called the note or financing instrument,

is the borrower’s personal promise to repay a debt according to the agreed terms.

The note exposes the borrower’s assets to claims by secured creditors.

A promissory note executed by a borrower, also called the maker or payor, is a contract in itself.

The note states the amount of the debt, the time and method of payment and the rate of interest.

When signed by the borrower, the noted becomes a legally enforceable and fully negotiable instrument of debt.

When the terms of the note are satisfied, the debt is discharged.

If the terms of the note are not met, the lender may choose to sue to collect on the note or to foreclose.

Question 27

Promissory notes are used for other types of loans including:

Answer 27

personal loans which are unsecured

Question 28

The lender that holds the note is called __ ____ and may transfer the right to receive the payments to a third party

Answer 28

the payee

Question 29

The lender that holds the note is called the payee and may transfer the right to receive the payments to a third party

Answer 29

1. By signing the instrument to a third party (assignment)

2. By delivering the instrument to a third party

Question 30

Interest is the…

Answer 30

Interest is the charge for using someone else’s money.

Question 31

When is interest due?

Answer 31

Interest may be due either at the beginning of the payment period or the end of the payment period.

Question 32

Interest that is paid at the end of the payment is said to be…

Answer 32

paid in arrears.

Question 33

Mortgage payments are typically end of period payments that are due on the

Answer 33

first of the following month

Question 34

The payment dates will be specified in the…

Answer 34

promissory note

Question 35

Usury laws are designed to…

Answer 35

Usury laws are designed to protect consumers from unscrupulous lenders and limit the interest rates that may be charged on loans.

Question 36

Usury laws vary by state and they may either provide

Answer 36

for a fixed maximum interest rate or a variable maximum interest rate that is tied to other economic variables such as the prime lending rate or the rate of return on government bonds.

Question 37

If lenders charge a borrower more than the maximum allowed in states with usury laws, the lender may be

Answer 37

forced to only collect the maximum or can be barred from collecting the principle or interest on the loan.

Question 38

The processing of a loan application is known as

Answer 38

loan origination

Question 39

A lender charges a loan origination fee to cover the

Answer 39

expenses involved in generating the loan.

Question 40

The expenses included in the loan origination fee are

Answer 40

the salary of the loan officer, paperwork and general business expenses.

Question 41

A loan origination fee varies but _ percent of the loan amount is typical

Answer 41

1%

Question 42

Is prepaid interest on the loan the same as loan origination fee?

Answer 42

No

Question 43

Colorado doesn’t use mortgages, instread they use:

Answer 43

Colorado uses the deed of trust or trust deed

Question 44

Does Colorado have the prepayment penalty?

Answer 44

No

Question 45

Lenders are not allowed to charge prepayment penalties on loans that are insured or guaranteed by

Answer 45

Fannie Mae or Freddie Mac

Question 46

The deed is given to :

Answer 46

The deed is given to a third party trustee who holds the title on behalf of the lender (beneficiary).

Question 47

The process to foreclose under the deed of trust is generally _____ than foreclosing under the mortgage process.

Answer 47

easier