Deck 9: Financing the Real Estate Purchase

Question 1

Lenders prefer nonnegotiable notes because the eventual holder of the note then becomes a holder in due course.

Answer 1

False

Question 2

The person who lends the money for a mortgage loan is both the payee and a mortgagee.

Answer 2

True

Question 3

In many states, a mortgagor in default on mortgage payments has two different time periods during which the property can be redeemed.

Answer 3

True

Question 4

Under a reverse annuity mortgage:

A)the homeowner receives a monthly payment from a bank as long as he remains in the home.
B)the lender receives a mortgage on the home but principal and interest are not due until the homeowner dies or sells the property.
C)if the amount due the lender at the homeowner's death exceeds the value of the home, the Federal Housing Administration will cover the loss.
D)all of the above.

Question 5

The law of mortgages governs cases where personal or real property is used to secure a debt.

Question 6

Which of the following fair lending laws was created to fight predatory lending practices:

A)Equal Credit Opportunity Act.
B)Community Reinvestment Act
C)Home Mortgage Disclosure Act.
D)Home Ownership and Equity Protection Act.
E)Real Estate Settlement Procedures Act.

Question 7

It is possible that a mechanic's lien will have priority over a mortgage even thoughthe mortgage was recorded first.

Question 8

A sale of property where the mortgage is assumed is similar to a sale of property subject to a mortgage in its effect on the purchaser.

Question 9

An FHA mortgage is insured, but not guaranteed, by the Fair Housing Administration.

Question 10

Under the federal Truth in Lending Act, Regulation Z, there are four major elements of mandatory disclosure.Which of the following is not one of them?

A)The finance charge.
B)Whether the note is negotiable or not.
C)The annual percentage rate.
D)The amount financed.
E)The mandatory right of rescission.

Question 11

Under the modern view of mortgages, the mortgage creates a security interest and no longer represents a transfer of title to the mortgagee.

Question 12

The annual percentage rate on a loan is higher than the interest rate alone.

Question 13

A note without a mortgage is usually worthless while a mortgage without a note has considerable value.

Question 14

Redlining occurs whenever lenders refuse to make mortgage loans to, or impose stricter mortgage terms on, certain individuals.

Question 15

Courts occasionally create equitable mortgages to protect creditors.

Question 16

In recent years, under the Community Reinvestment Act, lenders have been forced to lend to low-income borrowers in the communities where they take deposits before they can receive governmental approval to merge with a bank in another state.

Question 17

An "on or before" clause in a note is especially important for lenders.

Question 18

Under federal law, lenders may not discriminate on the basis of:

A)marital status.
B)political party.
C)receipt of welfare.
D)two of the above.(a and c)
E)none of the above.

Question 19

Usury laws are governed by the "Uniform Usury Code," which makes usury laws uniform throughout the United States.

Question 20

The following description best characterizes which instrument listed below: "A debtor deeds legal title to an independent third party who holds the deed as security for the creditor."

A)Conventional first mortgage.
B)Deed of trust.
C)Purchase money mortgage.
D)Reverse annuity mortgage.
E)None of these.

Question 21

The last possible event in the foreclosure process is the:

A)mortgagor's default on the loan.
B)execution of deed at foreclosure sale.
C)equity of redemption.
D)termination of the statutory redemption period.
E)foreclosure suit.

Question 22

A nonrecourse note:

A)results in a borrower becoming personally liable if there is a deficiency at the foreclosure sale.
B)is the kind of note that homeowners typically sign.
C)is more advantageous to borrowers than to lenders.
D)all of the above.

Question 23

State Mutual Bank has a mortgage on property owned by Aubrey.Aubrey sold the property to Clarence "subject to" the mortgage.On default, State Mutual can:

A)not foreclose on the property, but can obtain payment from Aubrey.
B)foreclose on the property and collect any deficiency from Aubrey.
C)foreclose on the property and collect any deficiency from Clarence.
D)none of the above.
E)two of the above

Question 24

Gary executes a negotiable note and mortgage in favor of Coastal State Bank to finance his house.Coastal transfers the note to Mountain Bank.Gary later loses all his money at the craps tables in Las Vegas, defaults on the note, and declares bankruptcy.Assuming that Mountain Bank is a holder in due course:

A)Gary will still owe Mountain Bank if the sale of his house is insufficient to pay the amount left on the loan, since bankruptcy is a personal defense.
B)Gary will not owe Mountain Bank because bankruptcy is a real defense that discharges the debt even against a holder in due course.
C)Gary will not owe Mountain Bank, but only if the bank signed a waiver of defense.
D)Gary will still owe both Mountain Bank and Coastal State Bank if the sale of the house is insufficient to pay the amount on the loan.

Question 25

Under an installment land contract:

A)the purchaser receives title to the property after he makes the final payment.
B)the purchaser typically receives title to the property shortly after obtaining financing from the lender.
C)the purchaser takes possession of the property only after paying off the debt.
D)the lender is usually a commercial mortgage lender.
E)two of the above.