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15 Cards in this Set
- Front
- Back
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A borrower was making payments on a loan that had a balloon payment at the end of the term. What kind of loan did he probably have? -partially amortized loan -term loan -fully amortized loan - straight loan |
Partially amortized loan: this type of note calls for regular, level payments on the principal and interest during the term of the loan. since the loan does not fully amortize over the original term, there is still a remaining principal loan balance. the last installment, called a balloon payment, is much larger than any of the other payments because it includes all of the remaining principal and interest |
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The cost of borrowing money is - interest - book value - proration - principal |
interest - lenders are compensated for their risk in the form of interest rates. |
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In the loan business, a beneficiary is: -the lender under a deed of trust - the borrower under the deed of trust - the trustee - someone who defaults on a loan |
the lender under a deed of trust: the three parties to a trust deed are the borrower (trustor), the lender (beneficiary), and a neutral third party called a trustee |
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Which of the following is not a characteristic of a promissory note? - it is signed by the borrower - it is a written promise to pay - it is payable at a definite time - it requires a mortgage for validity |
it requires a mortgage for validity: Promissory notes serve as evidence of the debt and is a written agreement between lender and borrower. a mortgage is not one of the requirements for a valid note |
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What is the clause in a loan document describing certain events that would cause the entire loan to be due? - subordination clause - novation clause - assumption clause - acceleration clause |
acceleration clause: allows a note holder to call the entire note due, on occurrence of a specific event, such as default in payment, taxes or insurance, or sale of the property |
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a standby commitment promises to deliver a takeout loan at a future date? True or false |
True |
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a foreclosure's reinstatement period is until ___ business days before the date of the trustees sale. - 5 - 21 - 3 - 45 |
5: the minimum time between recording the notice of default and the trustee sale is three months and 21 days. during this time the truster may reinstate the loan up to five business days prior to the trustees sale |
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a takeout loan is a loan that temporarily pays off a residential loan. True or False |
False: the permanent loan that pays off a construction loan is called a takeout loan. Interim construction loans are usually made by commercial banks, whereas standby commitments and takeout loans are arranged by mortgage companies for large investors such as insurance companies. |
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Mutual mortgage insurance on F.H.A loans: - protects the lender in case of the borrower's death - protects the lender in the event of default - protects the borrower from an earthquake loss - is paid for by the lender |
protects the lender in the event of default: the lender is protected, in case of foreclosure, by charging the borrower a fee for an insurance policy called mutual mortgage insurance (MMI). the insurance requirement is how the FHA finances its program. |
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Which of the following terms are most nearly identical? - Takeout loan, deficit financing - takeout loan, interim loan - construction loan, take-out loan - construction loan, interim loan |
construction loan/interim loan - a construction loan (interim loan) is eventually replaced by a long-term loan called a take-out loan |
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which of the following is not one of the functions of the FHA? -systemizing appraisals -setting minimum property requirements -making discounted loans to qualified borrowers -promoting home ownership |
making discounted loans to qualified borrowers. The FHA does not make loans; rather, it insures lenders against loss. promotes homeownership. secondary results include setting minimum property requirements and systemizing appraisals |
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a renegotiable rate mortgage is one that can be renewed periodically. True or false |
True: a renegotiable rate mortgage is a loan in which the IR is renegotiated periodically. the loan may be either a long-term loan with periodic interest rate adjustments, or a short-term loan that is renewed periodically at new IR, but based on a long-term mortgage |
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When borrowing under a Cal-Vet loan, the buyer: - receives title immediately upon close of escrow - received title if he/she makes payments on time for two years - receives title after completely paying off the loan - never receives title |
receives title after completely paying off the loan: upon application for a CalVet loan and approval of the borrower and property, the department of veterans affairs purchases the property from the seller, takes title to the property, and sells it to the veteran on a contract of sale |
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a blanket loan could be used to cover more than one parcel of property. True or false |
True: a trust deed or mortgage that covers more than one parcel of property may be secured by a blanket loan. |
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under which gov. financing program are approved applicants required to apply for life insurance? -F.H.A -CalVet -V.A. -Fannie Mae |
CalVet - helps veterans in buying a home or farm. he/she has an obligation to apply for life insurance, with the department of veterans affairs as beneficiary, to pay off the debt in case of the veterans death. |
