Evans Failed Questions Re Principals

Front 1

In which type of loan is the loan amount divided into two parts, to be paid off separately by periodic interest payments followed by a payment of the principal in full at the end of the term?

Back 1

The answer is STRAIGHT. In a straight loan (sometimes called a term loan), the borrower makes periodic payments of interest only. At the end of the loan term, the entire original principal debt must be paid.

Front 2

The clause that appears in both the promissory note and mortgage and allows the lender to call the balance due and payable in full upon default is known as the

Back 2

The answer is ACCELERATION CLAUSE. An acceleration clause allows the lender to call the entire loan due for several clauses including default. The due-on-sale or alienation clause is specific to the sale of the property.

Front 3

A seller is unsure whether she should renovate her kitchen before selling. What principle of value will help her determine whether the renovation is financially feasible?

Back 3

The answer is CONTRIBUTION. The principle of contribution will determine if the renovation is financially feasible and if it will give the seller an increasing return upon completion

Front 4

What is an instrument that creates a lien against multiple parcels of real property?

Back 4

The answer is BLANKET MORTGAGE. The blanket loan covers multiple properties and often contains a partial release clause to release the lien on one parcel when a certain amount has been paid.

Front 5

A property that is being sold has a water bill of $150 that has been paid in advance at the beginning of the month. How will the water bill be handled at closing on June 20th?

Back 5

The answer is CREDIT SELLER $50 AND DEBIT BUYER $50. For a water bill paid in advance, the buyer will owe the seller. $150 / 30 x 10 days owed = $50 debit buyer and credit seller.

Front 6

All of the following factors would be important when comparing properties under the sales comparison approach to value EXCEPT differences in

Back 6

The answer is ORIGINAL COST. None of the approaches to appraisal considers the original (historical) cost of a property. Original cost is used in computations of book-value depreciation. The other three factors would be relevant to the sales comparison approach (sometimes called the market data approach).

Front 7

In what way does a deed of trust differ from a mortgage?

Back 7

The answer is THE NUMBER OF PARTIES INVOLVED IN THE LOAN. A deed of trust is a three-party instrument that conveys naked title to a third party, the trustee, who holds the title on behalf of the lender, also known as the beneficiary. The borrower is the trustor. A mortgage is a two-part instrument between the mortgagor and the mortgagee.

Front 8

What principle of value does an appraiser use to determine how much value a new deck adds to a property?

Back 8

The answer is CONTRIBUTION. The appraiser is determining how much the deck contributes to the value of the property

Front 9

It is necessary to calculate a dollar value for depreciation when using which of the following?

Back 9

The answer is COST APPROACH TO VALUE. One of the components of the cost approach is the calculation of depreciation caused by wear and tear, functionality of items, or outside influences.

Front 10

The mortgagee's policy usually shows on the closing statement as a

Back 10

The answer is DEBIT TO THE BUYER. The mortgagee's policy is required by the lender and usually is considered to be the responsibility of the buyer.

Front 11

Which of the following advertisements would be considered a trigger item under Regulation Z

Back 11

The answer is ONLY $10,000 DOWN. Any specific down payment listed in an advertisement is a trigger item that requires additional information.

Front 12

When an individual under age 18 enters into a contract to purchase real estate it is

Back 12

The answer is VOIDABLE. When only one party may enforce a contract against the other party, it is voidable. The minor may enforce against the seller, but the seller cannot enforce a contract with a minor.

Front 13

Which law requires all advertising that references mortgage financing terms to contain certain disclosures

Back 13

The answer is TRUTH IN LENDING ACT (REGULATION Z). Regulation Z of the Truth in Lending Act requires that trigger items about mortgage financing in any kind of advertising must include additional disclosures

Front 14

What are the elements essential to determining value of real property

Back 14

The answer is SCARCITY, UTILITY, DEMAND, AND TRANSFERABILITY. To have value in the real estate market (monetary worth based on desirability), a property must have demand, utility, scarcity, and transferability. Remember the acronym DUST.

Front 15

It is illegal for a lending institution to refuse to make residential real estate loans in a particular area only because of the

Back 15

The answer is PHYSICAL LOCATION OF THE PROPERTY. Redlining refers to literally drawing a line around particular areas and refusing to make loans in that area, rather than looking at the economic qualifications of the applicant

Front 16

A lender will take certain factors into consideration when deciding whether to grant a borrower a mortgage loan. However, which of the following would be a violation of the Equal Credit Opportunity Act (ECOA)?

Back 16

The answer is AGE OF THE BORROWER. ECOA prohibits lenders from discriminating against credit applicants on the basis of several factors, including age and marital status

Front 17

The market value of a parcel of real estate is

Back 17

The answer is AN ESTIMATE OF THE MOST PROBABLE PRICE IT SHOULD BRING. Market value is the value that would be paid in an arm's-length transaction between knowledgeable parties.

Front 18

What does the lender charge to increase the yield on a loan

Back 18

The answer is DISCOUNT POINTS. To make money on the loan transaction, the lender will add an additional cost called a point (or discount fee) to the loan. A point equals 1 percent of the loan amount.

Front 19

Which of the following actions is legally permitted

Back 19

The answer is REFUSING TO MAKE A MORTGAGE LOAN TO A MEMBER OF A MINORITY GROUP BECAUSE OF A POOR CREDIT HISTORY. Bad credit can cause anyone to be rejected, even those who are members of protected classes.

Front 20

The lower the loan-to-value ratio, the higher the

Back 20

The answer is OWNER'S EQUITY. A lower loan-to-value ratio has a smaller loan and a higher down payment. The down payment represents the owner's equity.

Front 21

On a seller's closing statement, the seller would be credited for

Back 21

The answer is SALE PRICE. Credits are good for buyers and sellers. The sales price is a credit to the seller.