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50 Cards in this Set
- Front
- Back
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A second trust deed can be distinguished from a first trust deed by: a. the heading of the instrument. b. the information contained in the note. c. the time and date of recording. d. agreement of the principals. |
c. the time and date of recording (The priority of trust deeds is determined by the time and date of recording.) |
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Which of the following is true regarding promissory notes? a. They are used as security for trust deeds. b. Discounting a note indicates it is being sold at more than the face value, or the amount still owing on the principal. c. They are always used when real state is sold. d. They are the evidence of the debt. |
d. They are the evidence of the debt. (Promissory notes are the evidence of debt. Trust deeds are security for debt. Though promissory notes and trust deeds are frequently used as the loan instruments, there are alternatives, such as a land sales contract. Note when the word "always" appears in an answer choice, one exception defeats its accuracy.) |
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Hypothecate means: a. to give a thing as security without giving possession. b. to sell. c. to substitute. d. to alienate. |
a. to give a thing as security without giving possession. (To hypothecate is to offer property (real or personal) as security for a loan without giving up possession.) |
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Who generally benefits the most by a subordination clause in a trust deed? a. The beneficiary. b. The trustor. c. The trustee. d. The county tax assessor. |
b. The trustor. (The borrower (trustor) benefits the most from a subordination clause since this makes it easier to obtain an additional loan on their property. For example, the buyer of vacant land can obtain a construction loan more easily if the loan against the land will be subordinated to the construction loan.) |
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Total foreclosure time under a trustee's sale on a trust deed is minimally: a. one year. b. fifteen months. c. three months. d. four months. |
d. four months. (A trustee's sale includes a three month redemption period followed by three weeks of advertising the sale for a total just short of four months if the sale is processed without any delay. In practice, it is generally longer.) |
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The beneficiary of a trust deed is most likely a: a. buyer. b. bank. c. trustee. d. borrower. |
b. bank. (The beneficiary is the lender. Therefore, the only answer selection that applies is the bank.) |
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A clause in a trust deed calling for an assignment of rents most benefits the: a. trustee. b. trustor. c. purchaser. d. beneficiary. |
d. beneficiary. (An assignment of rents clause allows the lender to collect the rents on an income-producing property when the borrower defaults on the underlying loan.) |
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On each payment of an amortized loan: a. the same amount applies to principal each month. b. there will be a balloon payment. c. the amount applying to the principal increases with each payment. d. the amount applying to the interest increases with each payment. |
c. the amount applying to the principal increases with each payment. (With an amortized loan, whether fully or only partially amortized, the balance of the loan is reduced with each payment. Therefore, the interest portion of the payment decreases and the principal portion increases with each payment made.) |
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Which of the following are most related to each other? a. Taxes and insurance. b. Points and interest. c. Assessment and book value. d. Interest and taxes. |
b. Points and interest. (While all answer selections relate to one another, points and prepaid interest are synonymous, making this answer selection the best match.) |
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In the context of mortgage finance, a beneficiary statement is made: a. to designate the person who will receive the property in the event of the borrower's death b. by the insurer, stating the amount that will be paid to the policyholder if the improvements are destroyed. c. by the lender to state the current balance required to pay off a real estate loan. d. by the homeowner, listing the beneficial features of an assumable loan. |
c. by the lender to state the current balance required to pay off a real estate loan. (A lender (beneficiary) delivers a beneficiary statement to escrow as a statement of required funds to release the existing debt.) |
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A CalVET buyer finances the property with a: a. trust deed and note. b. contract of sale. c. mortgage. d. lease with an option to purchase. |
b. contract of sale. (CalVET loans are land contract purchases with the state functioning as the vendor.) |
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When the debt has been paid in full, the trustee will record what legal instrument to remove the lien on a trust deed from the public record? a. Statement of complete release. b. Satisfaction of payment. c. Redemption certificate. d. Reconveyance deed. |
d. Reconveyance deed. (A trustee records a reconveyence deed to release a trust deed.) |
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In a period of deflation: a. the value of money increases. b. profits increase. c. the gross national product increases. d. the value of commodities increase. |
a. the value of money increases.(Deflation is the opposite of inflation where money becomes worth less.) |
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When the Federal Reserve (the Fed) increases the reserve requirements, referred to as tight money policy, it will: a. result in more construction starts. b. increase the supply of funds available for making real estate loans. c. reduce deflationary pressures. d. decrease loan activity. |
d. decrease loan activity. (The tightening of money allows less money to be available for lending, resulting in a decrease of loan activity.) |
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If a lender accepts a deed-in-lieu of foreclosure, the lender: a. also receives a power of sale from the trustor. b. takes ownership of the property free and clear of all liens. c. goes to court and get a deficiency judgment. d. assumes any junior liens. |
d. assumes any junior liens. (When the holder of the first trust deed accepts a deed-in-lieu, they become responsible for all liens junior to their position.) |
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Gale is the beneficiary of a $1,500,000 deed of trust on a single family home. Frank, the trustor, made $200,000 in payments before going into default. At the trustee's sale, the property sold for $1,000,000, resulting in a $300,000 deficiency. In California, a deficiency judgment cannot be obtained: a. if the security is a purchase money trust deed. b. if foreclosed through a trustee's sale. c. if the fair market value (FMV) of the property exceeds the amount due on the trust deed. d. Any of the above. |
d. Any of the above. (In order to receive a deficiency judgment, a mortgage holder must use the judicial foreclosure option rather than a trustee's sale.) |
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When a borrower defaults on a loan and the lender initiates judicial foreclosure, the right of possession to the property is held by the ________________ during the redemption period. a. mortgagee b. commissioner designated by the court c. mortgagor d. sheriff |
c. mortgagor (The borrower (mortgagor) has possession during the redemption period.) |
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An owner's right to bring current any monetary or curable default stated in the notice of default (NOD) prior to five business days before the date of the sale is called: a. refurbishment. b. rejuvenation. c. reinstatement. d. redemption. |
c. reinstatement. (When full payment of arrears and costs have been made, the loan has been reinstated, bringing the loan current and placing the borrower in good standing.) |
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Bruce sold his home for $215,000 to Maria and carried back a $150,000 note with interest at 6% per annum. The note was secured by a first trust deed. The home had a fair market value (FMV) of $200,000. Later, Bruce sold the trust deed and note at a discounted price of $135,000 to Syndi. On the back of the note, Bruce wrote, "I hereby assign the within note to Syndi without recourse." If Maria defaults before any principal payments are made, Syndi's best legal remedy is to: a. foreclose to recover the $135,000 investment. b. do nothing since she has no recourse as an investor who purchased an existing loan and has no right to foreclose. c. sue her assignor. d. foreclose to enforce payment of the $150,000. |
d. foreclose to enforce payment of the $150,000. (The demand would be on Maria for the full amount of the monies owed regardless of the discounted price paid for the note.) |
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The power to sell a property in the event of a default under the terms of the trust deed is given by: a. trustee to the trustor. b. buyer to the beneficiary. c. buyer to the seller. d. trustor to the trustee. |
d. trustor to the trustee. (It is the borrower (trustor) who gives the authority to sell to the trustee.) |
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Which of the following entity does not buy loans in the secondary mortgage market? a. Freddie Mac. b. Ginnie Mae. c. Fannie Mae. d. Federal Housing Administration (FHA). |
d. Federal Housing Administration (FHA). (The Federal Housing Administration (FHA) is neither the lender nor purchaser of loans on the secondary mortgage market. The FHA acts as an insurer of the loan which is originated by a lender or mortgage company.) |
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Which of the following loans would be most likely to qualify for Federal Housing Administration (FHA) insurance but not for a Veterans Administration (VA) loan guarantee? a. A loan to fund the purchase of agricultural land. b. A loan to fund the purchase of one-to-four units of residential rental property. c. A loan to fund the purchase of a motel. d. A loan to fund the purchase of an existing business. |
b. A loan to fund the purchase of one-to-four units of residential rental property. (While neither the Federal Housing Administration (FHA) or Veterans Administration (VA) will guarantee properties intended for business (motel or agriculture included), FHA will do small residential rentals (one-to-four units).) |
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The primary purpose behind the creation of the Federal National Mortgage Association (FNMA) was: a. to increase the money available to housing. b. to provide funds to large home builders in urbanized areas. c. to lend money on FHA Title II loans when banks, savings and loan associations, or private lenders are unwilling to do so. d. to supervise public lending agency associations. |
a. to increase the money available to housing. (The Federal National Mortgage Association (FNMA) was created to repurchase qualifying loans, thus placing cash in the lenders' hands to facilitate a continuing source of monies to loan.) |
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In real estate loans, the term "impounds" most nearly means: a. attachments. b. reserves. c. court action. d. short rate. |
b. reserves. (When a lender requires impounds, they are demanding that monthly payments be made to establish a reserve fund to pay future property tax and insurance expenses.) |
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Inflation can be seen in the: a. increase in the cost of living. b. reduction of interest rates. c. existence of tight monetary policy. d. tightening of loan policies. |
a. increase in the cost of living.(Inflation is the reverse of deflation (see Question 13). Therefore, money becomes worth less and products become more expensive.) |
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Marta borrowed $25,000 on a straight note. In eight months, she paid $1,500. What was the interest rate: a. 8%. b. 9%. c. 10%. d. Cannot be calculated. |
b. 9%. (This question calls for an interest rate calculation using the following formula: Interest = Principal x Rate x Time (I = PRT). $1,500 = $25,000 x R x 8/12 1,500 = 25,000 x R x 0.667 1,500 = 16,667 x R 1,500 / 16,667 = (16,667 x R) / 16,667 0.09 = R or 9%) |
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Which of the following does not directly affect the level and movement of mortgage interest rates: a. demand for funds. b. supply of funds. c. inflation rate. d. unemployment rate. |
d. unemployment rate. (Supply and demand affects the return a lender can charge on a loan. Inflation is a risk factor that a lender adds to the yield required to fund. Unemployment indirectly influences the level and movement of mortgage interest rates through actions of the Federal Reserve (the Fed).) |
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The term warehousing in reference to mortgage financing describes: a. industrial property loans. b. jumbo residential loans. c. a mortgage broker who arranges loans for an individual borrower. d. a mortgage broker who packages loans prior to their sale on the secondary market. |
d. a mortgage broker who packages loans prior to their sale on the secondary market. (Warehousing in finance is similar to a retailer concept. Mortgage brokers bundle loans for sale on the secondary market.) |
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The release clause in a trust deed is there to release: a. the escrow company of liability. b. a borrower from certain obligations. c. the lender from future obligations. d. some properties upon partial payment, when more than one property is used as security for the debt. |
d. some properties upon partial payment, when more than one property is used as security for the debt. (When several properties are securing one loan, known as a blanket mortgage, a release clause allows individual properties to be withdrawn from the obligation.) |
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A homebuyer may rescind a purchase contract on a property for: a. 1 day. b. 3 days. c. 1 week. d. 10 days. |
b. 3 days. (The statutory right to rescind certain contracts runs for a three day period starting from the date the contract is entered into.) |
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One of the primary purposes of the Real Estate Settlement Procedures Act (RESPA) is to: a. set the settlement costs in all real estate transactions. b. standardize the prices of settlement costs on one-to-four unit residential properties. c. provide consumers with enough information to enable them to effectively shop for settlement services. d. standardize settlement services throughout the United States. |
c. provide consumers with enough information to enable them to effectively shop for settlement services. (While standardizing costs may seem likely a reasonable goal, the Real Estate Settlement Procedures Act (RESPA) is primarily intended to insure that consumers are not being charged hidden fees and have the information they need to make an educated decision between competing lenders.) |
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A disclosure which warns a buyer they may be liable for additional tax obligations after the close of escrow is the: a. supplemental tax bill disclosure. b. title insurance notice. c. military airport expansion disclosure. d. methamphetamine contamination notice. |
a. supplemental tax bill disclosure. (Supplemental taxes are those which cover the remaining portion of the year after escrow closes. Property taxes are levied from July to June of the following year. If an escrow closed on April 1st, the buyer is obligated for the final quarter of the year. If the transfer price is higher than the assessed value, the supplemental bill will be ¼ of the annual tax expense for the additional value.) |
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When a broker employs a salesperson, the broker needs to: a. provide annual pay increases in an amount no less than 3%. b. exercise reasonable supervision over the activities performed by the agent. c. establish a retirement program for the agent. d. provide minimal health and dental insurance coverage for the agent. |
b. exercise reasonable supervision over the activities performed by the agent. (The broker needs to exercise reasonable supervision over their sales staff, including independent contractors. Real estate salespersons are classified as employees for legal purposes and independent contractors for income tax purposes. Answer selection A does not apply and C and D are rare exceptions.) |
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When Jack sells his home, he wants to be relieved of the primary liability for payment of the existing loan. He needs to find a buyer who is willing to: a. take the property subject to the existing loan. b. assume the existing loan. c. execute a land contract. d. make a large down payment. |
b. assume the existing loan. (The buyer's assumption of the loan is the only answer selection offered that will relieve the seller of the primary responsibility for the underlying debt. Though the obvious answer would be for the seller to pay off the loan, that answer selection is not provided and therefore cannot be selected.) |
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When using the market comparison approach to appraise a single family residence (SFR), property comparisons are based on: a. the gross rent multiplier (GRM). b. price per cubic foot. c. the rental income the property generates. d. the entire property. |
d. the entire property. (When making property comparisons for the market approach, the appraiser considers the entire property and the immediate area, including its location, schools and other off-site elements that affect value. Answer selections A and C are related to the income approach, not the market comparison approach. Answer selection B is used for the cost approach and is employed only for specific types of properties, such as warehouses.) |
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Ethics is most nearly defined as: a. a broker's responsibility to the public, their principal and other brokers. b. honesty. c. sincerity. d. fiduciary. |
a. a broker's responsibility to the public, their principal and other brokers. (Given the choices offered, answer selection A. a broker's responsibility to the public, their principal and other brokers is the best description of ethics in real estate. Each of the alternative answer choices may seem appropriate, but not sufficiently inclusive.) |
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If a newspaper advertisement run by a licensee fails to identify their name or license number,this is referred to as: a. misleading conduct. b. a violation of the Truth-in-Lending Act (TILA). c. a blind ad. d. unethical behavior. |
c. a blind ad. (A blind ad is marketing material that fails to alert the reader to the fact that the advertisement was placed by a licensed real estate agent or broker.) |
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If a newspaper advertisement for the sale of a condominium states only the annual percentage rate (APR): a. the number of payments needs to be included. b. the down payment amount needs to be included. c. the total financing charges need to be included. d. no other disclosures are required. |
d. no other disclosures are required.(The annual percentage rate (APR) may stand alone as financial information without providing additional financial information in a newspaper advertisement.) |
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A subdivider needs to give a copy of the Real Estate Commissioner's public report to: a. anyone who is likely purchase one or more lots. b. anyone upon request. c. only bona fide purchasers who have signed a purchase contract. d. the salespeople they employ. |
b. anyone upon request. (A public report issued by the Real Estate Commissioner has to be made available to anyone who requests it. The report contains all material facts regarding the subdivision, including financial matters and items of record such as CC&R's.) |
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In the appraisal of a residential property, when is the cost approach most appropriate? a. For a new property. b. For a property constructed 15 years ago. c. For a property constructed over 30 years ago. d. For an income-producing multi-family property. |
a. For a new property. (New properties are the most appropriate for cost approach appraisals due to the challenge of calculating accrued depreciation on older properties.) |
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The placement of a house upon the lot is referred to as its: a. preference. b. zoning classification. c. orientation. d. location. |
c. orientation. (The placement of a house on its lot is called its orientation. This is also used to describe a direction such as “oriented toward the southern exposure.” Other than location, the alternative answer selections can be easily eliminated.) |
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The promissory note and mortgage are signed by: a. the mortgagee. b. the lender. c. the trustee. d. the mortgagor. |
d. the mortgagor. (Real estate mortgages are secured by property. Thus, the property owner (mortgagor) signs the promissory note and mortgage.) |
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A property owner intending to sell their property wants to add specific instructions to the listing specifying the property is not to be offered to anyone who is not a Caucasian. The broker is to: a. take the listing anyway and wait to see if anyone complains. b. tell the owner it is unlikely that a minority member would want to move into the neighborhood. c. refuse to take the listing and explain to the owner that this discriminatory activity violates both state and federal laws. d. explain to the owner that a licensed broker cannot discriminate, but a private owner can. |
c. refuse to take the listing and explain to the owner that this discriminatory activity violates both state and federal laws. (The broker has a fiduciary duty to their client to inform them of the legal ramifications of discrimination. All the alternative selections are clear violations of fair housing laws.) |
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The Fair Employment and Housing Act defines housing accommodations as improved or unimproved real property used or intended to be used as a residence by the owner and which consists of not more than: a. four residential units. b. ten residential units. c. one single family residence (SFR). d. five or more residential units. |
a. four residential units. (Fair housing laws are always based on one-to-four unit residential properties. This is true for lending under The Real Estate Settlement Procedures Act (RESPA) as well as rental and purchase arrangements handled by a licensed agent.) |
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The Federal Truth-in-Lending Act (TILA) defines the annual percentage rate (APR) as: a. the total of only the direct costs of credit paid by a borrower. b. the total of all costs which the borrower needs to pay in order to get the loan. c. the relative cost of credit expressed in percentage terms. d. the difference between the 10-year Treasury Note and the 3-month Treasury Bill. |
c. the relative cost of credit expressed in percentage terms. (The annual percentage rate (APR) is stated as a percentage and represents the total cost of credit including the prepaid interest costs (points).) |
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The charging by a private lender of more than the maximum amount of interest allowed by law is known as: a. unearned increment. b. leverage. c. usury. d. onerous. |
c. usury. (Usury is the term that describes an interest rate that exceeds the legal limit.) |
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Personal property may not: a. become real property. b. be hypothecated. c. be alienated. d. None of the above. |
d. None of the above. (Beware of question construction phrased in the negative, "may not." Here, you need to identify the answer selection that does not correctly complete the question. As personal property may undergo any of the activities referenced in all of the answer selections, None of the above is correct.) |
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When damages resulting from a breach of the contract are not adequate, each of the following may request specific performance, except the: a. purchaser. b. broker. c. attorney-in-fact for one of the principals. d. seller of a parcel of land. |
b. broker. (The parties to an escrow do not include the broker. Thus, the damages described do not include the broker's fee nor would the broker have any authority to demand specific performance.) |
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What are the three steps of the agency disclosure in proper chronological order? a. Elect, confirm, disclose. b. Confirm, elect, disclose c. Disclose, confirm, disclose. d. Disclose, elect, confirm. |
d. Disclose, elect, confirm. (There are three chronological steps of the agency law disclosure. Disclosure of the agency law is the first step. Then, the agent elects the role they will play in the relationship. Finally, the agent confirms that role with each of the participants in the transaction.) |
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The purpose of the Real Estate Law is to: a. prevent fraud. b. protect the public. c. keep track of all real estate transactions. d. limit competition. |
b. protect the public. (Most laws and regulations are designed to protect the public. Preventing fraud may be part of the goal, but the total reach of the Real Estate Law is far broader than that.) |
