Question 1

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

This is a violation of the law, specifically, it is an act of fraud. It is illegal to intentionally misstate the value of a property for the purpose of obtaining a loan. Nolan should not comply with this request and should report the attempted coercion to the appropriate authorities.

Question 2

Fact Pattern 31-1A
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 31-1A. 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 at least three business days before the loan is finalized. This gives borrowers time to review the disclosures and decide whether to proceed with the loan.

Question 3

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, including the annual percentage rate, finance charges, and other terms and fees. The Truth in Lending Act and the Real Estate Settlement Procedures Act provide important protections for borrowers in this regard.

Question 4

Fact Pattern 31-1A
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 31-1A. 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), if a lender fails to provide certain material disclosures related to a mortgage loan, the borrower has the right to rescind the loan for up to three years from the date of the loan closing. This right of rescission allows the borrower to cancel the loan and receive a full refund of any payments made. Therefore, option C is correct as Benny's right to rescind the loan is extended for up to three years if 24-Hour Credit fails to provide certain material disclosures.

Question 5

Fact Pattern 31-1A
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 31-1A. 24-Hour Credit assigns Benny's loan to Consolidated Mortgage Investment Corporation. For most purposes, Consolidated

Accepted Answer

When a loan is assigned, the assignee (Consolidated Mortgage Investment Corporation in this case) takes the loan subject to any claims or defenses that the borrower (Benny) could assert against the original lender (24-Hour Credit Corporation). Therefore, choice D is the best answer. Choice A is incorrect because the assignee of a mortgage loan does not automatically become a holder in due course. Choice B is incorrect because there is no such thing as "more protection than a mortgage assignee but less than an HDC." Choice C is incorrect because federal law applies to mortgages regardless of who holds or services the loan.

Question 6

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 is the legal right of a borrower to reclaim their property after it has been repossessed by the lender, usually by paying the amount owed on the loan plus any additional fees. In this scenario, Seymour is exercising his right of redemption by attempting to buy back the property before it is sold by the bank.

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 certain contracts, including mortgages, to be in writing to be enforceable. Therefore, to comply with this requirement, Milo's mortgage must be in writing. The other options (A, B, and C) do not necessarily apply to the requirement of the Statute of Frauds.

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 encouraging borrowers to refinance their loans frequently, typically resulting in higher fees and interest charges. This is what happened to Hubert when Integrity convinced him to refinance soon after obtaining the mortgage.

Question 9

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

To initiate the process to repossess and auction off the property securing the loan, Evermore Bank must record a notice of default with the appropriate county office. This is the first step in the foreclosure process, and it legally notifies the borrower that they are in default and their property may be repossessed if they do not take action to cure the default. After the notice of default is recorded, the bank may then proceed with issuing a notice of sale and offering the property for sale in an auction on the courthouse steps. Litigation may be necessary in certain cases, but it is not the first step in the foreclosure process.

Question 10

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 of their home as collateral for the loan.

Question 11

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 specified period. The principal balance remains unchanged during this period. After the specified period, the borrower must begin paying both principal and interest.

Question 12

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

Foreclosure is the legal process by which a lender tries to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property. In this case, if Velma fails to make mortgage payments, the bank can repossess and auction off her home to recover the loan amount. A short sale is when the lender agrees to accept a lower payoff amount than what is owed on the mortgage, while forbearance is an agreement between the lender and borrower to temporarily suspend or reduce mortgage payments. The equitable right of redemption is the right of the borrower to redeem, or buy back, the property from the lender after a foreclosure sale has taken place.

Question 13

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 is an adjustable-rate mortgage because the interest rate is fixed for three years and then adjusts annually.

Question 14

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

Accepted Answer

A mortgage is a loan specifically used for the purpose of buying real property, which is exactly what Helene is doing with the loan from Great Plains Bank. A down payment is a portion of the purchase price that the buyer pays up front, and is not the same as a loan. A short sale is a type of real estate transaction where the property is sold for less than the outstanding debt on the mortgage, and a workout agreement is a negotiation between a borrower and lender to modify the terms of an existing loan.

Question 15

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 16

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 price paid up front in cash is a down payment.

Question 17

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 the Home Affordable Modification Program (HAMP) is to reduce monthly mortgage payments to levels that homeowners can afford, making their mortgage payments more manageable and helping them avoid foreclosure.

Question 18

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 19

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 HPMLs are required to verify the borrower's ability to repay the loan. This is to ensure that borrowers are not given loans they cannot afford to repay, which could result in default and foreclosure. The other options (A, B, and C) are all practices that are prohibited under the same regulation.

Question 20

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 any fees or charges associated with obtaining the loan. It is expressed as a percentage of the total amount borrowed and must be disclosed by lenders under federal law. It helps borrowers compare the true cost of different loan offers.

Quiz 31: Mortgages Foreclosures After the Recession