Question 1

Erin and Dooley,a married couple,borrow $120,000 from Capital & Credit Bank to buy a home.When Erin and Dooley divorce,they are unable to make payments on the mortgage.The market value of the home has declined to less than the balance of the loan.Capital & Credit agrees to a sale of the property for this amount.This is

Accepted Answer

A short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance. In this case, Capital & Credit Bank is agreeing to sell the property for the amount of the loan, indicating a short sale is taking place. A deed in lieu of foreclosure involves the borrower voluntarily turning over the property to the lender to avoid foreclosure. A home equity loan is a loan that is taken out against the equity in a property. A reverse mortgage is a type of loan available to senior citizens in which they can receive payments from the equity in their home. None of these options are applicable in this scenario.

Question 2

Upton borrows $150,000 from Valley Credit Union to buy a home,which secures the loan.Three years into the term,Upton stops making payments on it.Valley Credit repossesses and auctions off the property to Wesley.The sale proceeds are not enough to cover the unpaid amount of the loan.In most states,Valley Credit can ask a court for

Accepted Answer

A deficiency judgment allows the lender to sue Upton for the remaining amount of the unpaid loan balance after the sale of the property. This is possible in most states and is often pursued by lenders in cases where the sale proceeds are not enough to cover the full loan amount. A reverse mortgage, on the other hand, is a type of loan where the borrower receives payments instead of making them and is not relevant to this scenario. A short sale is a real estate transaction where the property is sold for less than what is owed on the mortgage, but this option is not relevant in this case since the property has already been repossessed and auctioned off. Choosing option D (nothing) does not make sense as the lender is entitled to pursue legal action to recover the outstanding amount.

Question 3

Tracy borrows $30,000 from Secure State Bank.The lender accepts Tracy's equity in her home as collateral,which can be seized if the loan is not repaid on time.With respect to any proceeding that occurs if Tracy fails to make the payments,this loan is subordinated.This means that it

Accepted Answer

Subordinated loans have a lower priority than primary loans. In this case, Tracy's primary mortgage has priority over the loan from Secure State Bank, which means that in the event of a default, the primary mortgage will be paid off first before any payments can be made towards the subordinated loan.

Question 4

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 loan that has regular monthly payments during a set period, but at the end of that period, the full remaining balance of the loan is due. In this scenario, the large payment due at the end of the seven-year period makes it a balloon mortgage.

Question 5

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's (CFPB) regulations, a mortgage loan qualifies as a Higher-Priced Mortgage Loan (HPML) if its annual percentage rate (APR) exceeds the Average Prime Offer Rate (APOR) for a comparable transaction by a certain amount. This amount varies depending on the type of loan and the size of the transaction. Therefore, choice A is the correct answer. The other options are not relevant criteria for determining whether a loan is an HPML.

Question 6

Fact Pattern 
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
-Refer to Fact Pattern 16-1B.Under federal law,disclosures with respect to one of Northeast's loans must be provided

Accepted Answer

Under the federal law, disclosures must be provided a certain number of days before the loan is finalized. This is because it gives the borrower sufficient time to review and understand the terms of the loan before they are committed to it.

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 through the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). These laws require lenders to disclose certain information about the loan, such as the annual percentage rate (APR), finance charges, and total amount to be repaid over the life of the loan. These disclosures are designed to protect borrowers from unclear or misleading loan terms.

Question 8

Franz asks Gateway Mortgage Credit for a loan to pay for the purchase of a home.With a poor credit score and a high current debt-to-income ratio,Franz does not qualify for a standard mortgage.Gateway is most likely to provide

Accepted Answer

Since Franz does not qualify for a standard mortgage due to poor credit score and high current debt-to-income ratio, Gateway Mortgage Credit is likely to provide a subprime mortgage. Subprime mortgages are designed for borrowers who have poor credit scores and higher risk, and therefore have higher interest rates and fees. This increases the likelihood of the lender being able to recover their money in case of default.

Question 9

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

The scenario described is an example of steering, where a borrower is directed towards a particular mortgage product even though they may be eligible for other options. In this case, Duran is steered towards an adjustable-rate mortgage instead of a fixed-rate mortgage.

Question 10

Denise borrows $90,000 from Clear Lake Credit Union to buy a home.Denise loses her job and fails to make payments on the mortgage,but assures Clear Lake Credit that she will soon secure a new job.The lender agrees to postpone the payments.This is

Accepted Answer

Forbearance is when a lender agrees to temporarily postpone or reduce a borrower's payments, usually due to financial hardship, but expects the borrower to resume making payments after the agreed-upon period of time. This is what is happening in the given scenario, as Denise is experiencing job loss and the lender is agreeing to postpone her payments until she is employed again. A bridge loan is a short-term loan used to cover a financial gap, a reamortization is when the terms of a loan are adjusted to lower the monthly payments, and a restructure is when the terms of a loan are completely renegotiated. None of these terms accurately describe the situation in the given scenario.

Question 11

Agnes borrows $110,000 from Bay Harbor Bank to buy a home under a mortgage with an acceleration clause.After eighteen payments,Agnes stops making payments on the mortgage.Bay Harbor

Accepted Answer

The answer of Agnes borrows $110,000 from Bay Harbor Bank...

Question 12

Abner borrows funds from Boomtown Credit Union (BCU)to buy real property.Abner signs a written instrument that gives BCU an interest in the property as security for the debt's payment.This instrument is

Accepted Answer

The written instrument that gives BCU an interest in the property as security for the debt's payment is a mortgage.

Question 13

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 14

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 15

Fact Pattern 
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
-Refer to Fact Pattern 16-1B.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), Mai has the right to rescind the mortgage within three business days after receiving all required disclosures from Northeast Bank. This is known as the right of rescission.

Question 16

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

These terms are standard conditions for mortgage loans, and failure to comply with them could result in the lender foreclosing on the property. Therefore, a court is likely to enforce them.

Question 17

Gena borrows $350,000 from Fish Island Bank to buy a home,which secures the mortgage.In the seventh year of the loan,Gena stops making payments.After the bank repossesses the property but before it is sold,Gena may buy it by paying

Accepted Answer

Gena's failure to make payments resulted in the bank repossessing the property. To buy back the property, Gena would need to repay the full amount of the debt, plus any interest and costs. This is because the property was used as collateral for the loan, and the bank has a legal right to recover the full amount of the debt. Option A and B are not applicable because the property has not yet been sold, and the potential proceeds from the sale cannot be determined. Option C is not applicable because Gena's debt is not only limited to missed payments but also includes the full amount of the loan, plus interest and costs.

Question 18

Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home.Payments on the loan remain the same for the duration of the mortgage.This is

Accepted Answer

This is a fixed-rate mortgage, as the interest rate remains the same throughout the duration of the mortgage, resulting in consistent payments.

Question 19

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

Under federal law, the disclosed terms must be based on uniform formulas of calculation. This ensures that borrowers can compare loans from different lenders and make informed decisions. Lenders are required to use the same formulas when disclosing information such as the annual percentage rate (APR) and the total cost of the loan over its term.

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 16: Mortgages Foreclosures After the Recession