Question 1

Fact Pattern 22-2 
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people, including Benny, who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 22-2. 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, borrowers who obtain high-cost mortgage loans have the right to rescind the loan for up to three years if the lender fails to provide certain material disclosures, such as the annual percentage rate, finance charges, and other loan terms. Therefore, Benny's right to rescind the loan is extended for up to three years if 24-Hour Credit Corporation fails to provide the required disclosures.

Question 2

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

A bridge loan is a short-term loan that helps bridge the gap between the purchase of a new property and the sale of an existing one. In this case, Money Mortgage Mart is providing a short-term loan to Natalie to make a down payment on a new home before selling her current home, which is a classic example of a bridge loan. Home equity loans involve borrowing against the equity in a current home, while equitable right of redemption is a legal concept that may apply if a borrower defaults on a loan. The scenario described does not violate federal law.

Question 3

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

A home equity loan is a type of loan where the borrower uses the equity in their home as collateral. In this scenario, Rita is borrowing money from South State Credit Union and using the equity she has in her home as collateral. Therefore, this is a home equity loan.

Question 4

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

The federal law requires that interest rates and other terms of a loan, including the calculation of the interest rate, be based on uniform formulas of calculation. This ensures consistency in loan terms across different borrowers and lenders. The terms must also be disclosed in a manner that is clear and understandable to the borrower. It should not be in lenders' language, stated in "legalese" or set out in a formula unique to each loan.

Question 5

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

According to the Federal Reserve Board amendment to Regulation Z, lenders must verify the borrower's ability to repay the loan for HPMLs. Options A, B, and C are not allowed and go against consumer protection regulations.

Question 6

Community Trust Bank provides Devlin with a mortgage to buy a home. The rate of interest is fixed for seven years. At the end of that period, a large payment for the entire balance of the mortgage loan is due. This is

Accepted Answer

A balloon mortgage is a type of mortgage where the borrower makes fixed monthly payments for a set period of time (in this case, seven years). At the end of the term, the remaining balance on the mortgage is due in one lump sum payment, also known as the "balloon payment." This type of mortgage can be risky for the borrower, as they must be prepared to make a large payment at the end of the term or refinance the mortgage. However, it may be a good option for borrowers who have a plan in place to pay off the mortgage or plan to sell the property before the balloon payment is due.

Question 7

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 is the actual cost of the loan on a yearly basis, which includes the interest rate as well as any other fees associated with the loan. It is a standard disclosure required by federal law to provide borrowers with a clear understanding of the total cost of borrowing.

Question 8

Fact Pattern 22-2 
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people, including Benny, who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 22-2. Under federal law, disclosures with respect to one of 24-Hour Credit's loans must be provided

Accepted Answer

Under federal law, disclosures must be provided to a borrower a certain number of days before the loan is finalized in order to give the borrower sufficient time to review the terms and conditions of the loan and make an informed decision. This requirement is outlined in the Truth in Lending Act (TILA) and Regulation Z.

Question 9

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

Refinancing shortly after obtaining a mortgage is considered loan flipping, which involves repeatedly refinancing a loan in order to generate fees for the lender while putting the borrower at risk of default.

Question 10

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

Coercing someone into misstating the value of a property is a violation of the law, specifically in regards to fraud and misrepresentation. This is not a legal or ethical business practice and should not be considered a necessary tactic for profitability.

Question 11

Fact Pattern 22-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 22-1. Under federal law, disclosures with respect to one of Northeast's loans must be provided

Accepted Answer

Under federal law, disclosures must be provided to borrowers a certain number of days before the loan is finalized. This gives borrowers time to review the loan terms and make informed decisions about whether to proceed with the loan.

Question 12

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

As the terms are a part of the financing agreement between Laurel and Marketplace Mortgage Loans, it is likely that a court would enforce them. These terms are standard practices in mortgage lending and are meant to protect the lender's investment in the property. The court may also consider the fact that Laurel agreed to these terms when she borrowed the money.

Question 13

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

According to the Higher-Priced Mortgage Loan (HPML) rule under Regulation Z, a mortgage loan is considered an HPML if its annual percentage rate (APR) exceeds the average prime offer rate (APOR) for a comparable transaction by a certain percentage. The specific percentage depends on the loan amount, but it is generally 1.5 or 2.5 percentage points above the APOR. Therefore, the correct answer is A, which states that the APR of the loan must exceed the APOR for a comparable transaction. Choices B, C, and D are not relevant to the determination of HPML status.

Question 14

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 certain types of contracts to be in writing, including contracts that involve the sale or transfer of land. Therefore, Milo's mortgage, which is used to purchase a home, must be in writing to comply with the Statute of Frauds.

Question 15

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 the Truth in Lending Act (TILA), Pomeroy's right to rescind the loan is extended for up to three years if Riverview fails to provide certain material disclosures with respect to the loan.

Question 16

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, where the mortgage company is pushing Duran towards a particular mortgage product (in this case, an adjustable-rate mortgage) even though he qualifies for a different product (a fixed-rate mortgage). This is a violation of fair lending practices, as it could potentially result in Duran being given a loan that is not the best fit for his circumstances.

Question 17

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

Accepted Answer

Federal law primarily regulates mortgage terms that must be disclosed in writing. This includes requirements for the lender to provide a Loan Estimate and Closing Disclosure to the borrower, which outline the loan terms, interest rate, fees, and other important information. The law also prohibits certain unfair practices, such as steering borrowers into higher-cost loans or charging excessive fees. However, federal law does not regulate who can buy real property or where they can buy it.

Question 18

Fact Pattern 22-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 22-1. 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), borrowers have a right to rescind a mortgage loan within three business days from the date of closing, which is also known as the "right of rescission." Therefore, Mai can exercise this right within three business days if she decides to rescind the mortgage loan.

Question 19

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 20

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...

Quiz 22: Mortgages Foreclosures After the Recession