Question 1

Virgil borrows $175,000 from United Finance Bank to buy a home.Federal law regulates primarily

Accepted Answer

Federal law regulates mortgage terms that must be disclosed in writing through the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). These laws require lenders to disclose certain information, such as the annual percentage rate (APR), finance charges, total amount financed, and payment schedule, to borrowers before they sign a mortgage contract. This is to ensure that borrowers are informed of the terms and conditions of the loan before they commit to it.

Question 2

Property Financial Corporation makes loans that qualify,under a Federal Reserve Board amendment to Regulation Z,as Higher-Priced Mortgage Loans (HPMLs).Quinn applies to Property Financial for an HPML.To make the loan,the lender must

Accepted Answer

Under the Federal Reserve Board amendment to Regulation Z, lenders making Higher-Priced Mortgage Loans (HPMLs) must verify the borrower's ability to repay the loan. This is a key provision of the law aimed at preventing predatory lending practices. The other options, such as inflating the property value or imposing a prepayment penalty, would not be allowed under this law. Lenders are also not allowed to structure loans in a way that specifically evades the HPML protections.

Question 3

Hill & Dale Credit Corporation makes mortgage loans to consumers secured by their principal homes.For a Hill & Dale loan to qualify as a Higher-Priced Mortgage Loan (HPML),its annual percentage rate must exceed,by a certain amount,

Accepted Answer

The definition of a Higher-Priced Mortgage Loan (HPML) from the Consumer Financial Protection Bureau (CFPB) states that it is a mortgage loan with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for a comparable transaction by a certain percentage. Therefore, choice A is the correct one. Choices B, C, and D are not relevant to the definition of HPMLs.

Question 4

Tracy borrows $30,000 from Secure State Bank.The lender accepts Tracy's equity in her home as collateral,which can be seized if the loan is not repaid on time.With respect to any proceeding that occurs if Tracy fails to make the payments,this loan is subordinated.This means that it

Accepted Answer

Subordinated loans take a lower priority in the event of default or bankruptcy. This means that the primary mortgage on Tracy's home would be paid off first before Secure State Bank can seize Tracy's equity as collateral for the subordinated loan.

Question 5

Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home.The financing documents require Laurel to maintain the property,obtain homeowners' insurance,and pay all property taxes and other assessments through the lender.With respect to these terms,a court is most likely to

Accepted Answer

These terms are standard requirements for a mortgage loan and are typically enforced by the lender. The borrower has agreed to these terms when they signed the financing documents, so a court is likely to enforce them.

Question 6

Riverview Bank makes a mortgage loan of $95,000 to Pomeroy to buy a home.Under federal law,if Riverview fails to provide certain material disclosures with respect to the loan,Pomeroy's right to rescind the loan

Accepted Answer

Under federal law, if a lender fails to provide certain material disclosures with respect to a mortgage loan, the borrower's right to rescind the loan is extended for up to three years. This is known as the right of rescission, and it allows the borrower to cancel the loan and receive a full refund of any fees or costs associated with the loan. In this case, if Riverview Bank fails to provide the necessary disclosures, Pomeroy would have the right to rescind the loan for up to three years after the loan was finalized.

Question 7

Milo borrows $125,000 from North State Bank to buy a home.To comply with the Statute of Frauds,the mortgage must be

Accepted Answer

The Statute of Frauds requires contracts involving the sale or transfer of property to be in writing to be enforceable. Therefore, Milo's mortgage must be in writing to comply with this requirement.

Question 8

Hubert borrows $100,000 from Integrity Mortgage Mart to buy a home.Soon after obtaining the mortgage,Integrity convinces Hubert to refinance.This is

Accepted Answer

Loan flipping refers to the practice of repeatedly refinancing a mortgage, often with high fees and interest rates, in order to extract more money from the borrower. In this scenario, Integrity Mortgage Mart convinced Hubert to refinance soon after obtaining the initial mortgage, which is likely an example of loan flipping.

Question 9

Refer to Fact Pattern 20-2.Under federal law,disclosures with respect to one of 24-Hour Credit's loans must be provided

Accepted Answer

Under federal law, disclosures with respect to a loan must be provided a certain number of days before the loan is finalized.

Question 10

Fact Pattern 20-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 20-1.For Mai's loan,Northeast provides all required disclosures.Mai has a right to rescind the mortgage

Accepted Answer

According to the Truth in Lending Act (TILA), Mai has the right to rescind a mortgage loan within three business days after the loan closing. This right is provided to give borrowers time to review the loan documents and make sure they understand the terms and costs of the loan. It is important to note that the three-day period does not include weekends or federal holidays.

Question 11

Refer to Fact Pattern 20-2.Under federal law,if 24-Hour Credit fails to provide certain material disclosures with respect to the loan,Benny's right to rescind the loan

Accepted Answer

Under federal law, if a lender fails to provide certain material disclosures with respect to the loan, the borrower's right to rescind the loan is extended for up to three years.

Question 12

Dahlia borrows $125,000 from Clearview Credit Union to buy a home.The interest rate and other terms that are required to be disclosed under federal law must be

Accepted Answer

Federal law mandates that interest rates and other loan terms must be based on uniform formulas of calculation in order to promote fairness and transparency in lending practices. This allows borrowers like Dahlia to compare loan offers from different lenders more easily and make informed decisions. Expressing the terms in lenders' language or "legalese" could make it difficult for borrowers to understand what they are agreeing to, while a unique formula for each loan could lead to inconsistency and confusion.

Question 13

Rita borrows $30,000 from South State Credit Union.South State accepts Rita's equity in her home as collateral,which can be seized if the loan is not repaid on time.This is

Accepted Answer

This is a home equity loan where the borrower uses their home as collateral to secure the loan. In case the borrower fails to repay the loan, the lender may seize the collateral.

Question 14

Lorna borrows $175,000 from Mountainside Credit Union to buy a home.Among the terms that must be disclosed under federal law is the annual percentage rate.This is

Accepted Answer

The annual percentage rate (APR) is the actual cost of the loan on a yearly basis, including interest and fees. It is a standardized way for borrowers to compare loan offers from different lenders. The other options (B, C, and D) do not accurately represent the definition of APR.

Question 15

Violet negotiates with Urban Credit Corporation to obtain a loan for $85,000 to buy a home.During the negotiations,Urban Credit orally misrepresents the terms,but provides the required documents,which accurately state the terms.Violet does not read the documents.The party or parties most likely liable for a violation of the law is

Accepted Answer

The answer of Violet negotiates with Urban Credit Corporation to...

Question 16

Main Street Lenders,Inc. ,attempts to coerce Nolan-who specializes in determining the value of real and personal property-into misstating the value of a property on which a loan is to be issued.This is

Accepted Answer

Attempting to coerce an appraiser into misstating the value of a property is a violation of the law. Appraisers are required to provide their honest and unbiased assessment of the property's value, and any attempt to influence or manipulate their judgment is considered to be fraudulent and illegal. Main Street Lenders, Inc. should be aware of the serious consequences that can result from such actions, including fines, penalties, and legal action.

Question 17

Fact Pattern 20-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 20-1.Under federal law,disclosures with respect to one of Northeast's loans must be provided

Accepted Answer

Under federal law, disclosures with respect to a loan must be provided a certain number of days before the loan is finalized, to ensure that the borrower has enough time to review and understand the terms and conditions of the loan before agreeing to it.

Question 18

Shade Tree Lending Corporation advertises loans as fixed-rate loans but,in fact,their rates or payment amounts will change.This is

Accepted Answer

The answer of Shade Tree Lending Corporation advertises loans as...

Question 19

Duran applies to EZ Credit Mortgage Company for $100,000 to buy a home.EZ Credit steers Duran toward an adjustable-rate mortgage even though he qualifies for a fixed-rate mortgage.This is

Accepted Answer

This is an example of steering and targeting, which is a discriminatory practice where a lender steers a borrower towards certain types of loans or loan products based on their race, ethnicity, or other protected characteristics. In this case, Duran was steered towards an adjustable-rate mortgage even though he qualified for a fixed-rate mortgage.

Question 20

Money Mortgage Mart makes a short-term loan to Natalie to allow her to make a down payment on a new home before selling her current home.This is

Accepted Answer

The loan made by Money Mortgage Mart to Natalie is a bridge loan, which is a short-term loan used to bridge the gap between buying a new home and selling an old one.

Quiz 20: Mortgages Foreclosures After the Recession