Question 1

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 clear description of a fixed-rate mortgage where the interest rate remains constant throughout the life of the mortgage and payments stay the same.

Question 2

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

This is a scenario of a short sale, where the property is sold for less than the balance of the loan, and the lender agrees to accept the proceeds as full payment of the debt. A deed in lieu of foreclosure is where the borrower transfers ownership of the property to the lender to avoid foreclosure, but in this scenario, the bank is selling the property. A home equity loan and a reverse mortgage are not applicable to this scenario, as they are types of loans that the borrower takes out using the equity in their home.

Question 3

Fact Pattern 31-1B 
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
-Refer to Fact Pattern 31-1B.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, consumers have the right to rescind certain mortgage loans within three business days of signing the loan documents. This allows them time to review the terms of the loan and make sure they are comfortable with the obligations they are taking on. Therefore, Mai has the right to rescind the mortgage within three business days.

Question 4

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

A subordinated loan is one that has a lower priority than other loans or liens on the same property. In this case, Tracy's primary mortgage would have a higher priority than the loan from Secure State Bank, which is subordinated. If Tracy fails to make payments, the bank may seize her equity in the property, but only after the primary mortgage has been satisfied.

Question 5

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 Valley Credit to legally pursue Upton for the remaining unpaid amount of the loan, even after the property has been repossessed and sold at auction.

Question 6

Umberto and Tiara,who are married,borrow $110,000 from Sterling Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,subject to an acceleration clause,and secured by the home,which is their principal residence.When Umberto and Tiara have paid off $10,000 of the mortgage-still owing $100,000-they lose their jobs and stop making payments.Sterling Credit makes numerous attempts to contact the couple,but they do not respond.Meanwhile,the market value of their home has declined to $85,000.After six months,Sterling Credit decides to take steps to recover the unpaid amount of the loan.What are the lender's options? Which option seems most likely? Why? What are the steps are involved?

Accepted Answer

The answer of Umberto and Tiara,who are married,borrow $110,000 from...

Question 7

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 other terms be based on uniform formulas of calculation. This ensures that borrowers can compare loan offers from different lenders and make informed decisions. The terms must also be expressed in clear and easily understandable language, rather than "legalese," to avoid confusion or misinterpretation.

Question 8

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

A mortgage is a type of security interest in real property that is given to a lender as collateral for a loan. It is a legal document that contains the terms and conditions of the loan agreement, as well as the rights and obligations of both the borrower and the lender.

Question 9

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 acceleration clause allows the lender to demand the entire outstanding amount of the loan if the borrower defaults on payments. Therefore, Bay Harbor Bank can foreclose once on the entire amount of the loan.

Question 10

Fact Pattern 31-1B 
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
-Refer to Fact Pattern 31-1B.Under federal law,disclosures with respect to one of Northeast's loans must be provided

Accepted Answer

Under federal law, disclosures with respect to mortgage loans must be provided a certain number of days before the loan is finalized. This is known as the Truth in Lending Act (TILA) disclosure, which provides important information about the terms and costs of the loan to help consumers make informed decisions.

Question 11

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 terms requiring Laurel to maintain the property, obtain homeowners' insurance, and pay all property taxes and other assessments are standard requirements in mortgage loans. Therefore, a court is likely to enforce them as they are legal and reasonable conditions for borrowing the money.

Question 12

Donato borrows the funds from Eveready Bank to buy real estate and build a home.Donato's first draw of funds pays for the land.Subsequent draws occur at various stages of construction until the house is ready for occupancy.This is

Accepted Answer

A construction loan is specifically designed to fund the construction of a new home or building. It allows borrowers to draw funds at various stages of the construction process, as in Donato's case, until the project is complete. A balloon mortgage is a type of loan that has a large payment due at the end of the loan term, usually after a series of smaller payments. A participation loan is a type of loan in which multiple lenders fund a single borrower. A reverse mortgage is a loan for seniors that allows them to convert the equity in their home into cash. None of these options fit Donato's situation as well as a construction loan.

Question 13

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 Truth in Lending Act, a mortgage loan must have an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) by a certain amount in order to be considered a Higher-Priced Mortgage Loan (HPML). The specific amount that the APR must exceed the APOR varies depending on the type of loan and other factors. Therefore, choice A is the correct answer. Choices B, C, and D are not relevant to determining whether a loan is an HPML.

Question 14

Shade Tree Lending Corporation advertises loans as fixed-rate loans but,in fact,their rates or payment amounts will change.This is

Accepted Answer

This practice is a violation of the law because it involves false advertising and misrepresentation of the loan terms, which is illegal under consumer protection laws.

Question 15

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. This right is intended to give borrowers the opportunity to review the terms of the loan and ensure that they are getting a fair deal. If the lender fails to provide the required disclosures, the borrower can rescind the loan and receive a full refund of any fees or charges they paid in connection with the loan.

Question 16

Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home.The loan is a twenty-year,3/1,adjustable-rate mortgage,with an initial interest rate of 4.0 percent for three years and potential increases of up to 3.0 percent to a cap of 11.0 percent.Before the loan is completed,the lender discloses the amount of the loan principal,the initial interest rate,the initial annual percentage rate,and associated fees and costs.Not disclosed are material details about the amounts of the payments when the interest rate changes.Before the first increase takes effect,Sierra decides that she wants to rescind the loan.What is a "twenty-year,3/1,adjustable-rate mortgage"? Can Sierra rescind this loan? Why or why not?

Accepted Answer

The answer of Sierra borrows $175,000 from Regional Home Finance...

Question 17

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 an agreement between the lender and borrower to temporarily postpone or reduce payments due to a financial hardship. In this scenario, Denise has lost her job and is unable to make the mortgage payments, but the lender agrees to postpone the payments while she looks for a new job. A bridge loan is a short-term loan used to finance a property until long-term financing is obtained. Reamortization and restructuring typically involve changing the terms of the loan permanently, such as adjusting the interest rate or extending the repayment period, which is not the case in the given scenario.

Question 18

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 19

Virgil borrows $175,000 from United Finance Bank to buy a home.Federal law regulates primarily

Accepted Answer

Federal law, specifically the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), requires mortgage terms to be disclosed in writing to borrowers. This includes the annual percentage rate, finance charges, total amount being financed, and other important information related to the loan. The purpose of these laws is to provide borrowers with clear and accurate information about the cost of their mortgage and to prevent predatory lending practices.

Question 20

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

A subprime mortgage is designed for borrowers with poor credit scores and high debt-to-income ratios. It typically comes with a higher interest rate and stricter terms than a standard mortgage, but it would allow Franz to still secure financing for the purchase of a home. A deed in lieu of foreclosure, reverse mortgage, and workout agreement are not applicable in this scenario.

Quiz 31: A: Mortgages Foreclosures After the Recession