Question 1

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 Higher-Priced Mortgage Loans (HPMLs). Therefore, verifying the borrower's ability to repay the loan is necessary to make the loan. Choices A, B, and C are illegal or unethical practices that lender should never take to make a loan.

Question 2

Fact Pattern 26-2 
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 26-2. 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 mortgage loan must be provided a certain number of days before the loan is finalized. This is known as the TILA-RESPA Integrated Disclosure Rule, which requires lenders to give borrowers two separate forms with important information about the loan terms and costs at least three days before closing. This gives borrowers time to review and ask questions before they are committed to the loan.

Question 3

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 clear violation of the law as it involves fraud and misrepresentation. It is illegal to coerce someone to misstate the value of a property for financial gain. Such actions can lead to legal consequences for the lender and potential harm to the borrower. It is important for businesses and individuals to act ethically and within the confines of the law when conducting any financial transactions.

Question 4

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 5

Money Mortgage Mart makes a mortgage loan to Natalie to allow her to buy a home and establishes an escrow account. Most likely, this account holds payments for

Accepted Answer

An escrow account is typically used to hold payments for homeowners' insurance and property taxes. This ensures that these expenses are paid on time and helps protect the lender's investment in the property.

Question 6

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 is when a lender convinces a borrower to refinance their loan, often repeatedly, to generate profits from fees and charges associated with the refinancing process. This is likely what happened between Hubert and Integrity Mortgage Mart.

Question 7

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, including interest rates, fees, and repayment terms. This ensures that borrowers like Virgil are aware of the terms of their loan and can make informed decisions. The other options (B, C, and D) are not primarily regulated by federal law in relation to home mortgages.

Question 8

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 certain material disclosures are not made by the lender, the borrower is given an extended right to rescind the loan for up to three years from the date of closing. Therefore, Pomeroy's right to rescind the loan in this scenario would be extended for up to three years.

Question 9

Milo borrows $125,000 from North State Bank to buy a home. Because a mortgage involves a transfer of real property, the mortgage must be

Accepted Answer

The mortgage must be in writing because any transfer of real property must be in writing to be enforceable in court.

Question 10

Fact Pattern 26-2 
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 26-2. 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 the Truth in Lending Act (TILA), if a lender fails to provide certain material disclosures related to a high-cost mortgage loan, the borrower's right to rescind the loan is extended for up to three years. Therefore, Benny's right to rescind the loan would be extended for up to three years if 24-Hour Credit failed to provide certain material disclosures.

Question 11

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 payment is

Accepted Answer

A balloon payment is a large payment due at the end of a loan term, typically used in cases where the borrower expects to have the means to pay off the balance in full at that time. This is a common feature of certain types of mortgages, particularly those with fixed interest rates for a specific period of time. Community Trust Bank is providing Devlin with a mortgage that includes a balloon payment.

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 requires that interest rates and related terms be based on uniform formulas of calculation, in order to ensure transparency and fairness for borrowers. Terms expressed in lenders' language or "legalese" would not provide the necessary clarity for borrowers, and a unique formula for each loan would not provide the necessary consistency and comparability.

Question 13

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

The court is most likely to enforce the terms since they are standard requirements in a mortgage agreement and are necessary to protect the lender's investment in the property. Failing to maintain the property, obtain insurance, or pay property taxes would jeopardize the lender's security interest in the property, which would be unacceptable.

Question 14

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, as it involves using the equity in Rita's home as collateral for the loan.

Question 15

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, which is the practice of directing borrowers towards certain loan products, often for the benefit of the lender rather than the borrower. In this case, EZ Credit Mortgage Company may be steering Duran towards an adjustable-rate mortgage because it will be more profitable for the company in the long run, even though Duran may be better off with a fixed-rate mortgage. This practice is also known as targeting, where lenders target certain borrowers for specific loan products, often based on demographics such as race or ethnicity.

Question 16

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 17

Fact Pattern 26-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 26-1. For Mai's loan, Northeast provides all required disclosures. Mai has a right to rescind the mortgage

Accepted Answer

Under the Truth in Lending Act, Mai has the right to rescind the mortgage within three business days of signing the loan agreement.

Question 18

Fact Pattern 26-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 26-1. Under federal law, disclosures with respect to one of Northeast's loans must be provided

Accepted Answer

Federal law, specifically the Truth in Lending Act (TILA), requires lenders to provide certain disclosures to borrowers a certain number of days before the loan is finalized. This gives borrowers time to review the terms and ask any questions before committing to the loan.

Question 19

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 designed to help borrowers compare the costs of different loans. The interest rate at which the loan is made is a separate disclosure.

Question 20

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 Consumer Financial Protection Bureau, in order for a mortgage loan to qualify as a Higher-Priced Mortgage Loan (HPML), its annual percentage rate (APR) must exceed the average prime offer rate (APOR) for a comparable transaction by a certain amount. This is known as the "APOR threshold." Typically, if the APR for the loan is more than 1.5 percentage points above the APOR, it is considered an HPML.

Quiz 26: Mortgages Foreclosures After the Recession

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