Question 1

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 specifically designed to bridge the gap between the purchase of a new property and the sale of an existing property. This type of loan is commonly used when a borrower needs to make a down payment on a new home before selling their current home.

Question 2

Kenton borrows $150,000 from Liberty Home Finance Corporation to buy a home.Federal law concerns primarily

Accepted Answer

Federal law concerns primarily what must be disclosed with respect to a mortgage. This includes the Truth in Lending Act (TILA) which requires lenders to provide borrowers with clear and accurate information about the costs and terms of the loan. This includes the annual percentage rate (APR), finance charges, and any prepayment penalties or fees. Other disclosures required by federal law include the Good Faith Estimate (GFE), which provides an estimate of the costs associated with obtaining a loan, and the HUD-1 Settlement Statement, which details the actual costs paid at closing.

Question 3

Harbor Bay Bank has made mortgage loans to consumers that qualify for the Home Affordable Modification Program (HAMP),which offers incentives to lenders to change the terms of certain loans.The purpose of HAMP is to

Accepted Answer

The purpose of HAMP is to help eligible homeowners lower their monthly mortgage payments to affordable levels, through modifications to loan terms such as interest rate reductions, loan term extensions, or principal forbearance. This helps homeowners avoid foreclosure and stay in their homes.

Question 4

Ruth owns a home on which she has two mortgages provided by Security Bank.Town Refinance Inc.tells Ruth that it can refinance the loans to reduce her payments.Town Refinance provides all of the required documents,which accurately state the payments under the new loan as higher.Ruth does not read the documents.Town Refinance is most likely liable for

Accepted Answer

The answer of Ruth owns a home on which she...

Question 5

Jaime buys a home by paying part of the purchase price up front in cash and borrowing the rest of the funds from Valley Credit Union.The part of the price paid up front in cash is

Accepted Answer

The part of the purchase price paid up front in cash is commonly known as the down payment. This is the initial payment made by the buyer towards the total cost of the property. It is typically a percentage of the purchase price and reduces the amount of borrowing required from a lender like a credit union.

Question 6

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, which includes the interest rate, fees, and other charges associated with the loan. It provides a standardized way to compare loan offers from different lenders.

Question 7

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 the equity in their home as collateral for the loan.

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 inducing a borrower to repeatedly refinance a loan, often resulting in substantial fees or charges to the borrower, but little or no actual benefit. In this scenario, Integrity Mortgage Mart convinced Hubert to refinance soon after obtaining the original mortgage, suggesting that they may be engaging in loan flipping practices.

Question 9

Fact Pattern 
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 16-1A.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 the Truth in Lending Act (TILA), borrowers have the right to rescind certain mortgage loans for up to three years if the lender fails to provide certain material disclosures. This applies specifically to high-cost mortgage loans, which have higher interest rates, fees, and other costs than standard mortgage loans. Therefore, if 24-Hour Credit fails to provide the necessary disclosures to Benny, his right to rescind the loan would be extended for up to three years, giving him more time to consider his options and potentially find a better loan product.

Question 10

Great Plains Bank provides a loan to enable Helene to buy real property.This loan is

Accepted Answer

A mortgage is a loan used for the purpose of buying real property. It is secured by the property itself and provides the lender with the right to take possession of the property if the borrower defaults on the loan. A down payment is the amount of money paid upfront by the buyer, and a short sale and workout agreement refer to specific types of financial arrangements in the context of distressed real estate.

Question 11

Darwin borrows $200,000 from Evermore Bank to buy a home.Less than six months into the term,Darwin stops making payments on the loan.To initiate the process to repossess and auction off the property securing the loan,Evermore must

Accepted Answer

In order to initiate the repossession and auction process, Evermore must record a notice of default with the appropriate county office. This notice notifies the borrower that they have defaulted on their loan and gives them a grace period to bring the loan current. If the borrower does not do so, the property can then be sold at auction on the courthouse steps. Issuing a notice of sale to the borrower or resorting to litigation would not be necessary at this stage.

Question 12

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 an appraiser to misstate the value of a property is a violation of the law, specifically the Uniform Standards of Professional Appraisal Practice (USPAP). It is considered appraisal fraud and can result in legal consequences for both the lender and the appraiser. It is important to maintain ethical and legal standards in the lending industry to ensure fair and honest practices.

Question 13

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 must verify the borrower's ability to repay the loan for HPMLs. Imposing a prepayment penalty or inflating the value of the property are not requirements for making an HPML. Structuring the loan to evade HPML protections would be illegal.

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 contracts, including mortgages, to be in writing in order to be enforceable. Therefore, the mortgage in Milo's case must be in writing.

Question 15

Fact Pattern 
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 16-1A.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 high-cost mortgages must be provided to the borrower at least three business days before the loan is finalized. This gives the borrower time to review the terms and ask questions before committing to the loan.

Question 16

Consumer Mortgage Loans provides Demi with a mortgage to buy a home.Under the terms,Demi can choose to pay only the interest portion of the monthly payments and forgo paying of the principal for five years.This is

Accepted Answer

This is an interest-only mortgage, where the borrower has the option to pay only the interest portion of the monthly payments for a set period of time. It is a legal option offered by some lenders.

Question 17

Ridgeline Bank provides Stanley with a mortgage to buy a home.The rate of interest is fixed for three years and then adjusts annually.This is

Accepted Answer

The mortgage provided by Ridgeline Bank to Stanley is an adjustable-rate mortgage because the rate of interest is fixed for three years and then adjusts annually.

Question 18

Velma borrows $110,000 from Watershed Bank to buy a home.If she fails to make payments on the mortgage,the bank has the right to repossess and auction off the property securing the loan.This is

Accepted Answer

The bank's right to repossess and auction off the property securing the loan is known as foreclosure.

Question 19

Reed borrows $150,000 from Suburban Credit Union to buy a home,which secures the loan.Three years later,Reed stops making payments on the loan.After Suburban Credit repossesses and auctions off the property to Tyler,equity remains.This amount most likely belongs to

Accepted Answer

The answer of Reed borrows $150,000 from Suburban Credit Union...

Question 20

Seymour borrows $350,000 from Reliable Bank to buy a home.Seymour stops making payments on the loan ten months later.After the bank repossesses the property securing the loan but before it is sold,Seymour wants to buy it.This is

Accepted Answer

The right of redemption allows the borrower to reclaim the property before it is sold after repossession. Seymour may exercise this right and buy the property back from the bank. It is a legal option available to borrowers. A deficiency judgment occurs when the sale price of the repossessed property is less than the outstanding loan balance. A reverse mortgage is a type of loan where the borrower receives payments based on the equity in their property. None of these options are applicable in this scenario.

Quiz 16: Mortgages Foreclosures After the Recession