Unit 8 Mortgages, Deeds of Trust, and Lending Practices

Question 1

True or Flase

A promissory note is a legal instrument that evidences the debt that is secured by the mortagage or Deed of Trust.

Answer 1

True

Question 2

The borrower is the mortgagor and the lender is the:

Answer 2

Mortgagee

Question 3

Due on sale clause - also called alienation provides that:

Answer 3

when the property is sold, lender may demand immediate repayment of entire debt.

Question 4

Power of Sale Clause:

Answer 4

Gives the trustee/ mortgagee the power to foreclose without going to court.

Question 5

Loan to value formula:

Answer 5

mortgage amount / price, or value

Question 6

Equity is :

Answer 6

Market Value today - total debt today = Equity

Question 7

Equity can be increased by the following:

Answer 7

• Appreciation in the market
• Making additional principal payments
• Making capital improvements

Question 8

Leverage is:

Answer 8

Using borrowed money to finance and investment.

Question 9

The disadvantage to high leverage is:

Answer 9

A greater risk of defaulting on a loan

Question 10

The advantage of leverage is:

Answer 10

being able to control a large asset with little cash investment.

Question 11

Discount Points are:

Answer 11

Money paid to the lender to lower the interest rate on the loan.

one point = 1% of loan amount.
Lender charges points to increase yield on a loan.

Question 12

Loan Origination fee is:

Answer 12

An administrative charge by the lender to process and issue a loan.

Question 13

Foreclosure is:

Answer 13

a procedure whereby title to property used as security for a debt is taken by a creditor/ lender or 3rd party to satisfy the debt.

Question 14

the borrowers right to redeem the property before the foreclosure sale is:

Answer 14

equitable redemption

Question 15

A mortgage pledging personal property as well as real property as a security for a debt is a:

Answer 15

package mortgage

Question 16

The clause appearing in both the note and the mortgage that allows the lender to demand immediate payment of the entire debt if the borrower defaults is an :

Answer 16

acceleration clause

Question 17

A loan that is repaid in a single lump sum at the end of its life is called a straight loan or a :

Answer 17

Term loan

Question 18

A loan which payments are scheduled so the entire principle balance is repaid by the maturity date is a :

Answer 18

Fully Amortized loan

Question 19

A final payment that is larger than preceding payments is a :

Answer 19

Balloon Payment

Question 20

When more then on property is pledged as a security for a single loan, the mortgage is a:

Answer 20

Blanket Loan

Question 21

A mortgage given by the purchaser to the seller partial payment for the property is a:

Answer 21

Purchase Money Mortgage

Question 22

A loan that allows a borrower to make smaller payments of interest and principle but has a balloon payment at the end is a:

Answer 22

Partiallly Amortized Loan