Question 1

The primary purpose for recording a mortgage instrument is to&#10;A) establish its validity&#10;B) comply with tax laws&#10;C) give public notice of its existence&#10;D) safeguard the document

Accepted Answer

The primary purpose of recording a mortgage instrument is to give public notice of its existence. This ensures that any subsequent buyers or lenders are aware of existing liens on the property and protects the priority of the mortgage holder's interest in the property. While establishing validity, complying with tax laws, and safeguarding the document may also be important factors in recording a mortgage, they are not the primary purpose.

Question 2

Which of the following type of liens is the generally thought to be the most favorable towards lienholders right to foreclose?&#10;A) Mortgage&#10;B) Homeowners Associations&#10;C) Deed of Trust&#10;D) Mechanics lien

Accepted Answer

A deed of trust is typically considered the most favorable towards lienholders' right to foreclose because it allows for non-judicial foreclosure, which is typically quicker and less expensive than going through the court system. With a mortgage, foreclosure requires going through the court system, which can be more time-consuming and costly. Homeowners associations and mechanics liens also often require court involvement to foreclose.

Question 3

When you hypothecate an asset it means that you as a borrower have:&#10;A) signed a promissory note&#10;B) given a deed in lieu of foreclosure&#10;C) pledged an asset as collateral without giving up it use&#10;D) assigned their debt to another while retaining liability

Accepted Answer

Hypothecating an asset means pledging it as collateral without giving up its use. It is commonly used in secured loans, where the borrower offers an asset to the lender as security for the loan. The borrower retains ownership of the asset but risks losing it if they default on the loan. Signing a promissory note creates a binding promise to pay back the loan. Giving a deed in lieu of foreclosure transfers ownership of the asset to the lender instead of going through a foreclosure process. Assigning debt to another while retaining liability is called novation.

Question 4

Loans made within the parameters and using the uniform documents as required by Fannie Mae and Freddie Mac are known as:&#10;A) Fannie Mae or Freddie Mac loans&#10;B) Conforming loans&#10;C) Other Conventional loans&#10;D) Government standard loans

Accepted Answer

Loans made within the parameters and using the uniform documents as required by Fannie Mae and Freddie Mac are known as conforming loans. These loans conform to the guidelines set by these two government-sponsored entities and therefore are eligible for purchase in the secondary mortgage market by them.

Question 5

The instrument that provides the security for a promissory note is the:&#10;A) Mortgage or Deed of Trust&#10;B) Warranty Deed&#10;C) Property Assignment&#10;D) Contract for Deed

Accepted Answer

A promissory note is a written promise to repay a debt, while a mortgage or deed of trust is a legal document that provides a lender with a security interest in the property in the event the borrower defaults on the loan. Therefore, the instrument that provides the security for a promissory note is a Mortgage or Deed of Trust.

Question 6

Which of the following is a three-party instrument?&#10;A) Construction Mortgage&#10;B) Third Mortgage&#10;C) Deed of Trust&#10;D) Promissory Note

Accepted Answer

A Deed of Trust involves three parties – the borrower (trustor), the lender (beneficiary), and a third party who holds the legal title to the property (trustee). The trustee holds the property as security for the loan and has the power to sell the property if the borrower defaults on the loan. The other options listed are two-party instruments, as they only involve the borrower and the lender.

Question 7

Which of the following folds the highest priority of claim if properly filed against property?&#10;A) Property Taxes&#10;B) First Mortgage Lien&#10;C) Second Mortgage Lien&#10;D) Homestead Claim

Accepted Answer

Property taxes hold the highest priority of claim against property when properly filed, taking precedence over mortgages and other liens.

Question 8

The key difference between a contract for deed and a mortgage instrument is&#10;A) the manner in which payments are made&#10;B) in a contract for deed, title does not pass until part or all of the payments are made&#10;C) state laws differ on contract meaning&#10;D) mortgage instruments are not permitted in all states

Accepted Answer

The key difference between a contract for deed and a mortgage instrument is that in a contract for deed, title does not pass until part or all of the payments are made, while in a mortgage instrument, title passes immediately and the lender holds a lien on the property. The manner in which payments are made may vary between the two, but it is not the key difference. State laws may differ on the meaning of a contract for deed, but this is not the key difference and mortgages are permitted in all states.

Question 9

A prepayment penalty could be due if&#10;A) the loan is foreclosed.&#10;B) the monthly payment is delinquent.&#10;C) payment is made prior to maturity.&#10;D) the lender grants a payment moratorium.

Accepted Answer

A prepayment penalty is a fee that may be due if a borrower pays off a loan before the maturity date. Therefore, choice C is the correct answer as it describes a situation where a prepayment penalty may be applicable. None of the other choices correspond to scenarios where a prepayment penalty would be assessed.

Question 10

Laws that determine how land is owned and rights are conveyed are made by:&#10;A) The Federal Land Office&#10;B) State Law&#10;C) Local customs&#10;D) The Federal Housing and Urban Development

Accepted Answer

Laws that determine how land is owned and rights are conveyed are primarily made by state law. While the Federal Land Office and the Federal Housing and Urban Development may have some involvement in certain land-related matters, they do not have the main authority to dictate land ownership and conveyance laws. Local customs may also play a role in certain areas, but state law takes precedence.

Question 11

A written agreement that grants priority of claim to another party is called a/an:&#10;A) subordination agreement&#10;B) adjustment of priorities instrument&#10;C) second Lien&#10;D) latent claim

Accepted Answer

The answer of A written agreement that grants priority of...

Question 12

If a buyer accepts the responsibility to pay an existing loan on the property purchased, it is called:&#10;A) Release of Liability&#10;B) Exercise of the Due-on-Sale Clause&#10;C) A Liability Exchange&#10;D) A Loan Assumption

Accepted Answer

The answer of If a buyer accepts the responsibility to...

Deck 6: The Mortgage Documents