Chapter 12

Front 1

Which legal instrument evidences the debt and states the interest rate, term, payment requirement, and other information related to the loan?

(a) Promissory note
(b) Contract
(c) Lien
(d) Mortgage

Back 1

Promissory note

Front 2

What is the function of a mortgage?

(a) It conveys title to real property.
(b) It secures the repayment of the debt.
(c) It creates a personal pledge to repay a loan.
(d) It creates a lien on the mortgagee's property.

Back 2

It secures the repayment of the debt.

Front 3

When financing the purchase of real estate, what is the role of the mortgagor?

(a) The mortgagor gives a mortgage to a mortgagee.
(b) The mortgagor takes a mortgage from a mortgagee.
(c) The mortgagor gives a mortgage to a borrower.
(d) The mortgagor takes a mortgage from a lender.

Back 3

The mortgagor gives a mortgage to a mortgagee.

Front 4

Which clause in a mortgage requires the lender to acknowledge performance by the borrower?

(a) Estoppel
(b) Acceleration
(c) Defeasance
(d) Release

Back 4

Defeasance

Front 5

In order to qualify for an FHA insured mortgage loan, an applicant's housing expense ratio cannot exceed what percentage?

(a) 25%
(b) 28%
(c) 31%
(d) 43%

Back 5

31%

Front 6

Which statement best describes a short sale?

(a) A real estate transaction that closes in under 30 days.
(b) A settlement agreement where the lender agrees to a sales price that is below the outstanding loan balance.
(c) A real estate transaction where the seller agrees to assist the buyer by taking a second mortgage.
(d) A transaction that does not close due to a buyer's shortage of funds at closing.

Back 6

A settlement agreement where the lender agrees to a sales price that is below the outstanding loan

balance.

Front 7

What is the purpose of a receivership clause in a mortgage?

(a) It is used to protect the value of property during the foreclosure process.
(b) It conveys ownership to mortgaged property to the rightful heirs of a decedent.
(c) It allows an owner to charge rent when a property is mortgaged.
(d) It specifies the party entitled to ownership of mortgaged property when a loan has been fully paid.

Back 7

It is used to protect the value of property during the foreclosure process.

Front 8

Which of the following terms refers to the right of a mortgagor in default to pay all money owed and prevent the sale of the property at foreclosure?

(a) Equity of redemption
(b) Estoppel
(c) Defeasance right
(d) Right of release

Back 8

Equity of redemption

Front 9

What is the primary purpose of discount points?

(a) To subsidize the purchase of homes by low-income borrowers.
(b) To decrease the monthly payment required.
(c) To stop disintermediation.
(d) To decrease the lender's yield.

Back 9

To decrease the monthly payment required

Front 10

What are the two ratios under which a borrower must qualify in order to receive a FHA insured mortgage loan?

(a) Housing expense and monthly gross income ratios
(b) Housing expense and total monthly obligations ratios
(c) Gross income and total obligations ratios
(d) Housing expense net ratio and total monthly obligations net ratio

Back 10

Housing expense and total monthly obligations ratios

Front 11

What process is used by loan underwriters to determine if applicants are satisfactory credit risks?

(a) Servicing

(b) Brokering

(c) Qualifying
(d) Leveraging

Back 11

Qualifying

Front 12

A borrower is consistently late on their mortgage payments, so the bank exercises its ability to raise the interest rate. Which clause in the mortgage document allows the lender to do this?

(a) Default Rate Mortgage Clause
(b) Escalation Clause
(c) Late Payment Clause
(d) Due-on-Sale Clause

Back 12

Escalation Clause

Front 13

How was title taken if a seller remained solely liable for the balance of a mortgage loan subsequent to transfer of ownership?

(a) Novation
(b) Assumption
(c) Subject to
(d) Agreement for deed

Back 13

Subject to

Front 14

After all liens have been paid following a foreclosure sale, who do any remaining funds belong to?

(a) The sheriff of the county in which the property is located
(b) The clerk of the circuit court
(c) The mortgagor
(d) The mortgagee

Back 14

The mortgagor

Front 15

Which mortgage clause is the borrower's promise to pay the property taxes during the period of the loan?

(a) Maintenance
(b) Defeasance
(c) Receivership
(d) Tax

Back 15

Tax

Front 16

Which of the following would allow a homeowner to exit a foreclosure proceeding by paying any amount due, including fees and interest prior to the completion of the foreclosure process?

(a) Statutory right of redemption
(b) Right of defeasance
(c) Equity of redemption
(d) Right of reliction

Back 16

Equity of redemption

Front 17

Where would information such as the loan amount, interest rate, term of the loan, and responsible parties be found?

(a) Sales contract
(b) Mortgage deed
(c) Mortgage
(d) Promissory note

Back 17

Mortgage

Front 18

What is the approximate effective rate of interest (APR) if a mortgage loan is based on an interest rate of 5% per annum, and the lender charges 8 discount points?

(a) 4%
(b) 5.13%
(c) 6%
(d) 13%

Back 18

6%

Front 19

In a lien theory state such as Florida, title to property is held by whom during the time period that the resident is making monthly mortgage payments?

(a) Bank
(b) Mortgagor
(c) Trustee
(d) Trustor

Back 19

Mortgagor

Front 20

Two discount points on a 7% loan will increase the effective rate of interest on the loan to approximately what rate?

(a) 7 1/8%.
(b) 7 1/4%.
(c) 7 1/2%.
(d) 7 3/4%.

Back 20

7 1/4%.

Front 21

If a property owner is foreclosed upon, and the foreclosure results in a sale price greater than the amount of the outstanding liens, the excess will likely be paid to which of the following?

(a) The court
(b) The mortgagee
(c) The mortgagor
(d) The Florida Real Estate Recovery Fund

Back 21

The mortgagor

Front 22

All of the following disclosures are required by the Real Estate Settlement Procedures Act (RESPA) with the exception of:

(a) Servicing Disclosure Statement
(b) Good Faith Estimate
(c) Special Information Booklet
(d) ADA Accesibility Report

Back 22

ADA Accesibility Report

Front 23

After paying mortgage payments for many years, a homeowner finally pays the last payment. How does the lender extinguish the mortgage lien on the property?

(a) The lender would file a Mortgage Revocation on the property.

(b) The lender would file a Satisfaction of Mortgage in the county records where the property is located.
(c) The lender will send the borrower a letter of final payment which the borrower can then show to any future buyers.
(d) The lender will stamp the original mortgage "paid in full" and send a copy to the borrower.

Back 23

The lender would file a

Satisfaction of Mortgage in the county records where the property is located.

Front 24

Which would offer a potential borrower the most favorable interest rate over the life of the loan?

(a) 4.0% plus 8 points
(b) 4.5% plus 6 points
(c) 4.75% plus 4 points
(d) 5% plus 2 points

Back 24

4.0% plus 8 points

Front 25

If the loan amount is $850,000.00 and the loan to value ratio is 65%, what is the purchase price of the property?

(a) $552,500
(b) $852,351
(c) $1,307,692
(d) $2,428,571

Back 25

$1,307,692

Front 26

Using the information below, what is the buyer's housing expense ratio?

Spouse 1 salary = $8,000
Spouse 2 salary = $6,000
Monthly mortgage payment (Principal and Interest) = $3,000
Interest rate = 5%
Loan term = 30 years
Annual property taxes = $8300
Annual property insurance = $6800
Monthly credit card bill = $450
Car payment = $573

(a) 39%
(b) 30%
(c) 25%
(d) 21%

Back 26

30%

Front 27

Which clause found in a mortgage would state that the lender could only look to the property itself for satisfaction of the mortgage

debt?

(a) Granting clause
(b) Exculpatory clause
(c) Redemption clause
(d) Due-on-sale clause

Back 27

Exculpatory clause

Front 28

Lenders are required to judge loan applicants on the basis of credit rating, income, expenses and assets, without regard to their age,

race, religion, sex, marital status, or nationality. Which Act prohibits this discrimination?

(a) Truth-in-Lending Act
(b) RESPA
(c) Fair Housing Act
(d) ECOA

Back 28

ECOA

Front 29

George has applied for a loan with Acme Savings and Loan.

His gross monthly income averages $4,100.

He has a monthly car payment of $425 and owes a balance on two credit card accounts with payments totaling $75 per month.

If approved, his monthly mortgage payment will be $825. What is George's monthly

housing expense ratio? What is his total

obligations ratio?

(a) Housing expense ratio = 20%; Total obligations ratio = 12%
(b) Housing expense ratio = 32%; Total obligations ratio = 20%
c) Housing expense ratio = 20%; Total obligations ratio = 32%
(d) Housing expense ratio = 32%; Total obligations ratio = 12%

Back 29

Housing expense ratio = 20%; Total obligations ratio = 32%

Front 30

A borrower has applied for a loan. The purchase price of the property is $280,000. If the borrower has $70,000 as a down payment,

what is the loan-to-value ratio?

(a) 25%
(b) 33%
(c) 66%
(d) 75%

Back 30

75%

Front 31

A borrower has applied for a loan. The purchase price of the property is $280,000. The borrower has $70,000 as a down payment.

If the lender approves the loan subject to

the payment of 2 points and the interest rate on the loan is 9%, what is the amount of the loan discount and what is the effective yield to the lender?

(a) Loan discount = $4,200; Effective yield = 9 1/4%
(b) Loan discount = $5,600; Effective yield = 9 1/4%
(c) Loan discount = $4,200; Effective yield = 8 3/4%
(d) Loan discount = $5,600; Effective yield = 9 1/2%

Back 31

Loan discount = $4,200;

Effective yield = 9 1/4%

Front 32

Which of the following statements regarding a deed of trust is

correct?

(a) It is only used when the parties trust each other.
(b) It is never used in title theory states.
(c) It is used in lien theory states.
(d) It temporarily conveys title to a third party.

Back 32

It temporarily conveys title to a third party