Modern Real Estate in NC - Chapter 13 & 14
Terms in this set (152)
The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or another covenant.
Adjustable-rate mortgages (ARMs)
A loan characterized by a fluctuating interest rate, usually one tired to a published index. Caps for adjustments on periodic interest, lifetime interest, and payment amounts are normal.
This clause prevents the borrower from letting someone else assume the debt without the lender's approval. See due on sale clause
A loan in which principal as well as interest is payable in periodic installments over the term of the loan.
A final payment of a mortgage loan that is larger then required periodic payments because the loan amount was not fully amortized.
The person for whom a trust operates or in whose behalf the income from a trust estate is drawn.
A lender in a deed of trust loan transaction
The recipient of personal property (bequest or legacy) in a will
The principal and interest payment on a loan.
Deed in lieu of foreclosure
A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This avoids foreclosure but does not remove liens from the property; "friendly foreclosure"
Deed of trust
An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (the lender); also called a trust deed.
The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due.
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full; a general lien.
Direct reduction loans
A mortgage loan that requires a fixed amount of principal payment in each period; the total debt service payment starts higher then with a level payment loan since interest portion will reduce with each payment.
Interest paid in advance; one point equals 1% of the loan amount for the borrower and increases the yield for the investor approximately 1/8%
A provision in a mortgage that states that the entire balance of the note is immediately due and payable if the mortgagor transfers (sells) the property. See alienation clause
The interest held by the grantor in a deed of trust that allows possession and use of the pledged property.
The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolutely ownership to property when legal title is held in another's name.
The interest or value that an owner has in property over and above any indebtedness.
Equity of redemption
The right of a borrower in default on a mortgage loan to reclaim the forfeited property prior to the foreclosure sale through payment in full of all debt and associated costs.
A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the even of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all liens affecting the property subsequent to the mortgage.
Graduated payment mortgage (GPM)
A loan in which the monthly principal and interest payments increase by a set amount each year for a certain number of years and then level off for the remaining loan term; probably negative amortization in early years.
The property owner that is transferring title to or an interest in real property to a grantee.
A borrower in a deed of trust loan transaction.
The pledging of property as security for an obligation or a loan without losing possession of it.
A charge made by a lender for the use of money
The form of foreclosure used in lien theory states.
Some states interpret a mortgage as being a lien on real property. The mortgagee thus has no right of possession but must foreclose the lien and sell the property if the mortgage defaults.
Loan Origination fee
An administrative fee charged to the borrower by the lender for making a mortgage loan; usually computed as percentage of the loan amount.
A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien in a lien theory state.
A mortgagee is the lending in a mortgage loan transaction; a mortgagor is the borrower in a mortgage loan transaction
When the debt service payment on a loan is not large enough to pay the interest due; the principal balance actually grows with each payment.
A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee's right to payment.
Power of sale foreclosure
The form of foreclosure used in a title theory state, such as NC; also called nonjudicial foreclosure.
A charge imposed on a borrower who pays off the loan principal early. This penalty compensates the lender for interest and other charges that would otherwise be lost due to payments made ahead of schedule.
A sum loaned or employed as a fund or an investment.
The original amount of the total balance due and payable at a certain date.
A main party to a transaction-the person for whom the agent works; the client.
A financing instrument that states the terms of the underlying obligation, is signed by its maker and is negotiable (transferable to a third party); a personal IOU
Satisfaction of mortgage
A document acknowledging the full repayment of a mortgage debt.
When a lender allows a borrower in default on mortgage loan payments to sell the mortgaged property for less money than necessary to satisfy the loan to avoid the delay and expense of a foreclosure sale; lender usually "forgives" the balance owed after the sale, although the IRS will frequently consider the forgiven amount to be taxable income for the borrower.
Statutory redemption period
Statutory right of redemption
The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges.
A loan in which only interest is paid during the term of the loan, with the entire principal due with the final interest payment; also called a straight loan
Describing those states like NC that interpret a mortgage to mean that the lender is the owner of mortgaged land who vests the legal title with the trustee while borrower holds equitable title. Borrower regains legal title upon full payment of the mortgage debt.
Charging interest at a higher rate then the maximum rate established by state law.
The return on investment; amount of profit.
Annual percentage rate (APR)
The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth in Lending Act.
A mortgage covering more then one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.
A financing technique used to reduce monthly payment for the first few years of a loan. Funds in the form of discount points are given to the lender to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.
Certificate of reasonable value (CRV)
A form indicating the appraised value of a property being financed with a VA loan.
A standardized conventional loan that meets Fannie Mae's or Freddie Mac's purchase requirements.
Consumer financial protection bureau (CFPB)
A federal agency created by the Dodd-Frank Act in 2010 to oversee consumer protection via financial regulations within seven federal agencies.
A loan from private investors that requires no government insurance not guarantee.
Department of Housing and Urban Development (HUD)
A federal cabinet department active in national housing programs. Among its many programs are urban renewal, public housing, model cities, rehabilitation loans, FHA subsidies, fair housing enforcement, and water and sewer grants.
Equal Credit Opportunity Act (ECOA)
The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status.
Fair Credit Reporting Act
A quasi-government agency established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lender.
Federal Reserve System
The country's central banking system, which controls the nation's monetary policy by regulating the supply of money and interest rates.
A loan insured by the Federal Housing Administration and made by an approved private lender in accordance with the FHA's regulations.
A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.
A government agency under HUD that plays an important role in the secondary mortgage market. It sells mortgage-backed securities that are backed by pools of FHA and VA loans
home equity loan
A loan (sometimes called a line of credit) under which a property owners use their residence as collateral and can then draw funds up to a prearranged amount against the property.
A residential mortgage loan is excess of acceptable loan amounts for purchase by Fannie Mae or Freddie Mac; also called nonconforming loans
loan-to-value ratio (LTV)
The relationship between the amount of the mortgage loan and the value of the real estate bring pledged as collateral.
A mortgage loan that is expandable by increments of two a maximum dollar amount, the full loan being secured by the same original mortgage; equity line mortgage
A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a furnished home that includes window coverings in major appliances.
Predatory Lending Act
Unscrupulous, sometimes fraudulent, lending practices usually intending to make repayment impossible; designed to take advantage of unwary borrow ours that are frequently the low income, uninformed, elderly or non-English-speaking.
primary mortgage market
The mortgage market in which loans originated, consisting of lenders such as commercial banks, savings associations, and mortgage brokers.
private mortgage insurance (PMI)
Insurance provided by a private carrier that protects a lender against a loss in the event of foreclosure and deficiency
Purchase money mortgage
A note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate
Real Estate Settlement Procedures Act (RESPA)
Federal law that ensures that the residential buyers and sellers receive full disclosure of all settlement charges when a 1-4 family unit residence is financed by federally related to first mortgage loans. the act mandates a HUD booklet about closing cost, a good faith estimate of closing costs, and a standardize HUD one closing statement. the act known as regulation X also prohibits kickbacks from lenders
Implement the truth in lending act requiring credit institutions to inform borrowers of the true cost of obtaining credit
A loan under which the homeowner receives monthly payments based on the homeowners accumulated equity rather than a lump sum. the loan must be repaid at a prearranged date, upon the death of the owner or the sale of the property.
sale and leaseback
A transaction in which an owner sells improved property and, as part of the same transaction signed a long-term lease to remain in possession of the premises
secondary mortgage market
A market for the purchase and sale of existing mortgages, designed to provide greater liquidy for mortgages; also called the secondary money market. mortgage are first originated in the primary mortgage market
A written agreement between holders of the liens on the property that changes the priority of mortgage, judgment, and other liens under certain circumstances
A loan made to a borrower with a credit rating below what is required for regular loans creating greater risk liability for the lender that is counter by higher interest rates and fees; called B, C or D paper
Truth in Lending Act
See regulation Z
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the department of Veterans Affairs to limit the lenders possible loss
Under an installment land contract, the title to the property is held by the
Charging more interest that is legally allowed is known as
A mortgagor is the one who
-gives the mortgage
-holds the mortgage
-provides the mortgage funds
-forecloses on the mortgage
A promissory note
-may not be executed in connection with a real estate loan
-is an agreement to perform or not to perform certain acts
-is the primary evidence of a debt
-is a guarantee by a government agency
A land contract provides for the
-sale of unimproved land only
-sale of real property under an option agreement
-conveyance of legal title at a future date
-immediate transfer of reversionary rights
The administrative fee charged by the lender to make the loan is
-a loan discount fee
-an advance interest payment
-a loan origination fee
-a mortgage insurance premium
A homebuyer recently financed his first home with a fixed-rate conventional loan.The type of interest he will pay over the life of the loan is probably
The loan amount expressed as a percentage of the value of the real estate offered as collateral is the
If the amount realized at a mortgage foreclosure auction is more than the amount of the indebtedness and expenses, then the excess belongs to the
The purpose of the Real Estate Settlement Procedures Act (RESPA) is to
-ensure that buyers do not borrow more money than they can repay
-make real estate brokers more responsible to the needs of buyers
-help sellers know how much money is required to purchase the property
-see that borrowers know all of their settlement costs
A homebuyer financed his home five years ago with a high loan-to-value, fixed-rate loan. Due to a job transfer, the owner must more, but his home has suffered significant depreciation in value since purchase. Which of the following is not a legal way to handle the disposition of the property?
-Ask the lienholder to participate in a short sale transaction
-the seller uses other assets to make up the shortfall between the outstanding mortgage loan balance and the proceeds from the sale
-the owner could abandon the house and stop making loan payments
-the owner can convert the house to a rental property and use the rent to make mortgage payments
An existing mortgage loan can have its lien priority lowered through the use of a
-satisfaction of mortgage
-reconveyance of mortgage
If the monthly interest payment at 6 percent is $1,050, the principal amount of the loan is
If the proceeds from the sale of a foreclosed property are less than the amount required to satisfy the outstanding mortgage loan debt and legal expenses, the grantor may be
-a default judgment
-a deficiency judgment
The clause in a deed of trust or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default by the borrower is the
A building was sold for $115,000. Down payment in the amount of $15,000 was deposited in escrow, and the buyer obtained a new loan for the balance of the purchase price. The lender charged 2 discount points. What was the total amount charged to the buyer for points in this purchase?
When a mortgage loan has been paid in full, it is important for the borrower to be sure that
-the paid note is placed in a safe deposit box
-a deed of partial reconveyance is obtained
-the paid mortgage is returned to the lender
-the satisfaction of mortgage is recorded
A deed of trust differs from a mortgage in all of the following ways except
-the number of parties involved in the loan
-the obligation of the borrower to repay the funds
-the redemption rights allowed after foreclosure
-the time period permitted to cure a default
A person who assumes an existing mortgage is
-not liable for he maintenance of the collateral property
-not in danger of losing the property by default
-personally responsible for paying the principal balance
-generally released from liability, but not always
The financial interest in a property held by the owner in excess of any liens against it is called
The trustee foreclosure on a property after the borrower defaulted on the loan payments. At the foreclosure auction, however, the house sold for only $129,000. The unpaid balance of the loan at the time of the sale way $140,000. What must the lender do to recover the $11,000 the borrower still owes?
-sue for damages
-sue for specific performance
-seek a judgment by default
-see a deficiency judgment
The right a grantor has to regain the property ownership by paying the debt after a foreclosure sale is called
The clause in a mortgage loan instrument that would prevent the assumption of the mortgage loan by a new purchaser is
-an alienation clause
-a power of sale clause
-a defeasance clause
-a certificate of sale clause
The defeasance clause in a deed of trust requires in a specified situation to execute
-an assignment of mortgage
-a satisfaction of mortgage
-a subordination agreement
-a partial release agreement
The seller agrees to sell the property to the buyer for $100,000. The buyer was unable to qualify for a mortgage loan for this amount with a traditional lender so the seller and buyer enter into a contract for deed. The interest the buyer has in the property under a contract for deed is
A friendly foreclosure enables a grantor to prevent the trustee from taking the property by statutory means. This can be accomplished by
-a deed in lieu of foreclosure
-a reconveyance deed
-an escrow deed
Mortgage lenders want assurance that future real estate taxes will be paid. The most common way to do this is to require the borrower to
-obtain lender title insurance coverage
-prepay the property taxes by January 31 of each year to satisfy the tax liability for the year
-make installment payments into an escrow account
-submit receipts to the lender showing the taxes have been paid
When real estate is sold under an installment land contract, the legal title
-is subject to a purchase money mortgage agreement
-must be transferred to a land trust
-is held by the seller until the purchase price is paid in full
-is transferred to the buyer at settlement
Which of the following is true about an installment land contract?
-the buyer is given immediate possession and use of the property
-the seller delivers a deed to the buyer
-the buyer obtains a mortgage loan from a traditional lender
-the seller delivers legal title to the buyer at settlement
If a buyer obtains a $150,000 mortgage at 7 1/2 percent annual interest with one and one-half points, how much will the lender charge for the points at settlement?
If the yield on a 30-year fixed-rate loan is 7 1/4 percent and a mortgage lender charges one point, what is the interest rate on the mortgage note?
-7 1/8 %
-7 1/4 %
-7 3/4 %
-8 1/4 %
In absence of an agreement to the contrary, the mortgage having priority will be the one
-for the highest amount
-that was recorded first
-that was signed first
-that is a construction loan
The pledging of property as security for payment of a loan is
The purpose of a mortgage is to
-provide security for the loan
-convey title of the property to the lender
-restrict the borrower's use of the property
-create a lien on the property
The grantor becomes the lessee and the grantee becomes the lessor under which of the following financing arrangements?
-lease with option to buy
-sale and leaseback
-assumption of mortgage
Which of the following pairs of terms is considered most synonymous?
-interim financing and construction loan
-construction loan and variable rate loan
-pass through loan and assumption loan
-take out loan and construction loan
-originates FHA loans in the primary mortgage market
-purchases FHA loans in the secondary mortgage market
-provides farm loans
-provides insurance for FHA loans
The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the
-open end mortgage
-growing equity mortgage
-graduated payment mortgage
The Truth-in-Lending Act sets forth requirements regarding real estate loans to individuals for all of the following purposes except
-equity line of credit
-additions to residential properties
-installation of a backyard swimming pool
An FHA-insured mortgage loan would be obtained from
-the Federal House Administration
-the Department of Housing and Urban Development
-any qualified lending institution
-an qualified insuring institution
Fannie Mae and Freddie Mac have a common purpose of
-originating residential mortgage loans
-purchasing existing mortgage loans
-insuring residential mortgage loans
-guaranteeing existing mortgage loans
Which of the following statements is true?
-the priority of a mortgage is determined by the execution date
-a mortgage document contains no covenants on the part of the borrower
-a deed of trust is typically conveyed by the trustor to the beneficiary
-a promissory note has to be in writing to be enforceable, but it is not normally recorded.
A mortgage broker generally offers which of the following services?
-handling the escrow procedures
-bringing the borrower and the lender together
-providing credit qualification and evaluation reports
-granting real estate loans using investor funds
An eligible veteran is under contract to purchase a home for $80,000 that he wants to finance with a VA-guaranteed 100 percent loan-to-value loan. Four weeks after contract formation, a certificate of reasonable value (CRV) for $77,000 was issued for the property. In this situation, the veteran may consider any of the following options except
-withdrawing from the transaction without penalty
-purchasing the property with an additional $3,000 cash from his own funds.
-negotiating with the seller to reduce the sales price $3,000
-borrowing the $3,000 for the cash down payment from a private source.
A borrower obtained a $7,000 second mortgage loan for 5 years at 6 percent interest per annum. Monthly debt service payments were $50. The final payment included the remaining outstanding principal balance. What type of loan is this?
-a fully amortized loan
-a straight loan
-a partially amortized loan
-an accelerated loan
All of the following statements about short sales are true except
-the lienholder cannot be forced to participate in the short sale
-the borrower may be taxed on any debt that is forgiven by the lienholder
-the lienholder can file for a deficiency judgment for debt not paid by the sale of the collateral property
-a sales contract has not been
The principal distinction between the primary mortgage market and the secondary mortgage market is in the
-insuring versus the guaranteeing of mortgage loans
-origination verses the purchase of mortgage loans
-use of mortgages versus the use of deeds of trust
-use of discount points versus the use of origination fees.
A real estate loan payable in periodic installments that are sufficient to pay the principal in full during the term of the loan is call
-a conventional loan
-a straight loan
-a participation loan
-an amoritized loan
An extension of credit from seller to a buyer to allow the buyer to complete the transaction is called a
-growing equity mortgage
-purchase money mortgage
When compared with a 30-year payment period, taking out a loan with a 20-year payment period would result in all of the following except
-higher monthly payments
-quicker equity buildup
-greater escrow amounts
Presume the interest rate on an FHA-insured mortgage loan to be 6 1/2 % with a current monthly interest payment of $846. What would be the current principal?
Which of the following is NOT a required chief disclosure for compliance with the Truth-in-Lending act?
-annual percentage rate
-total of all finance charges
-total amount financed
A borrower would most likely obtain a residential real estate mortgage loan from
-an insurance company
-a pension fun
-a commercial bank
-a savings and loan association
Regulation Z applies to
-real estate sales agreements
-commercial loans less than $10,000
-personal credit transactions less than $25,000
FNMA's activities include buying and selling of all of the following except
-FHA & VA mortgages
-mortgages at full face value
-mortgages at discounted values
The Federal Home Loan Mortgage Corporation was established as a secondary mortgage market entity to assist the
-Federal Housing Administration
-Federal National Mortgage Association
-federal savings and loans
A graduated payment loan is one in which
-mortgage payments decrease
-mortgage payments balloon in 5 years
-mortgage payments increase as scheduled
-the interest rate on the loan adjusts annually
If a loan balance is $213,500 and the annual interest rate is 5 1/2 %, what is the amount of the next monthly interest payment?
A mortgage loan that is secured by both real and personal property is called a
-purchase money mortgage
What is the maximum loan for which a borrower can qualify if his annual income is $84,000, his monthly recurring debt is $746, his estimated monthly taxes and insurance escrow amount is $285, his loan factor is 6.32, and the qualifying ratios are 28 & 36?
Which of the following statements is not true regarding the secondary mortgage market?
-Fannie Mae can purchase conventional, FHA, and VA loans
-Freddie Mac originally purchased conventional loans primarily from savings associations
-Ginnie Mae is associated with conventional loans
-Non-conforming loans do not comply with secondary market guidelines.
A buyer obtained a 30-year fixed-rate loan for $72,000 at a 5 % annual interest rate. If the monthly debt service payment is $386.64, how much interest rounded to the nearest dollar would the buyer pay over the lifetime of the loan?
A mortgage loan requires monthly debt service payments of $675.75 for 20 years and a final payment of $5,095. This type of a mortgage loan is
-a wraparound mortgage
-an accelerated mortgage
-a balloon mortgage
-a variable mortgage
In a sale-and-leaseback arrangement, the
-seller retains legal title to the real estate
-buyer becomes the lessee
-broker will not earn a commission
-buyer becomes the lessor
Last month's debt service payment included $412.50 interest on a $60,000 loan balance. What is the annual rate of interest?
The Equal Credit Opportunity Act
-is a federal law that regulates real estate agent actions in advertising financing for listings
-requires that a rejected credit application be told why credit was denied
-has protected classes that are identical to fair housing laws
-is a state banking law that regulates mortgage lender practices
The type of loan that will most likely have the lowest loan-to-value ratio is a
A lender may require the borrower to obtain additional security for the lender in the event of a borrower default on the loan. That security might arise from
-private mortgage insurance
A lender will take all the following factors into consideration when deciding whether or not to approve a borrower's mortgage loan application except
-the marital status of the borrower
-the creditworthiness of the borrower
-the amount of the borrower's income
-the borrower credit score
The servicing of mortgage loan includes all of the following activities except
-paying real estate taxes from escrow accounts
-sending overdue notices
Which of the following terms may appear in an advertisement for a real estate loan without triggering Regulation Z full disclosure requirements?
-$499 Monthly Payments
-only one penny down
-8 % interest rate or lower
-assumable mortgages available
A developer had a mortgage loan on an entire development. When a lot was sold to a buyer, the developer was able to deliver title to that lot free of the mortgage lien by utilizing a partial release. What type of loan did the developer have?
-purchase money mortgage
Which of the following statements is true?
-all FHA-insured and VA-guaranteed loans are assumable
-interest rates on VA-guaranteed loans are set by VA
-FHA loans are funded by public funds through private lenders
-Only eligible veterans can assume a VA loan
Which of the following statements about VA-guaranteed loans is true?
-there is no maximum VA loan amount
-only eligible veterans with entitlement intact can assume a VA loan
-VA loans can only be used to finance detached single-family homes
-a veteran can use a VA loan only once in their lifetime
All of the following might be part of an adjustable rate mortgage except
In a title theory state, a borrower's default could result in the collateral property being sold at auction as part of a
-power of sale foreclosure
-deed in lieu foreclosure
In NC, a deficiency judgment
-is allowed on purchase money deeds of trust
-is a specific lien that attaches to all real property currently owned by the debtor in the county filed
-would not be discovered by a title search
-can be renewed by the creditor