Chapter 5

Question 1

What is used by banks to determine if a borrower is qualified to obtain a mortgage….?

Answer 1

Assets, Income, Credit

Question 2

A term given to the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement is known as what?

Answer 2

Acceleration Clause

Question 3

This is a method of financing in which the loan that finances the purchase of a home also finances the
purchase of personal items such as a washer and dryer, refrigerators, stove, and other specified
appliances…

Answer 3

Package Mortgage

Question 4

A mortgage is only related to what?

Answer 4

Real Property

Question 5

Mortgage brokers, mortgage bankers, credit unions and banks all operate in the…?

Answer 5

Primary Mortgage Market

Question 6

A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a
desired final level is known as what…?

Answer 6

Graduated Payment Mortgage

Question 7

Satisfaction Mortgage

Answer 7

A document acknowledging the payment of a mortgage debt

Question 8

Wrap-around Mortgage

Answer 8

A mortgage in which the seller extends to the buyer a junior mortgage which wraps around the existing mortgage.

Question 9

This clause allows a lender to require the balance of a loan to be paid in full if the collateral is sold.

Answer 9

“Due on Sale” Clause

Question 10

The elimination of kickbacks and referral fees that unnecessarily increase the costs of certain settlement
services was enacted as part of this Act

Answer 10

Real Estate Settlement Procedures Act (RESPA)

Question 11

A term mortgage is also referred to as

Answer 11

Straight Mortgage

Question 12

What is typically used as security for a mortgage?

Answer 12

Real property

Question 13

Lender’s Rights

Answer 13

• Right to foreclose on the property if borrower defaults (over 90 days late on mortgage payments)
• Right to take possession of real estate if borrower defaults
• Right to assign the mortgage to another lender

Question 14

Borrower’s Rights

Answer 14

• Right to occupy real estate
• Right to pay off the mortgage

Question 15

Which document creates a lien against a property…?

Answer 15

Mortgage

Question 16

Defeasance Clause

Answer 16

Clause found in a mortgage ensures that the borrower will maintain clear title on the property in the event the bank is forced to foreclose…?

Question 17

Mortgagor

Answer 17

The borrow, typically a homeowner, who issues the mortgage.

Question 18

What type of mortgage is often recommended for buyers seeking to live in the house for only a short period of time?

Answer 18

Adjustable mortgage

Question 19

A clause found in a blanket mortgage which gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, and thus freeing a portion of the property from the mortgage.

Answer 19

Release Clause

Question 20

A loan secured by equity value in the borrowers property

Answer 20

Home Equity Loan

Question 21

Reductions of the income subject to tax, for various items, especially expenses incurred to produce
income is known as what…?

Answer 21

Interest and Tax Deductibility

Question 22

Kristen has been late on her mortgage payments and is now in default on the mortgage. Which clause in
Kristen’s mortgage will allow the bank to foreclose on the property…?

Answer 22

Acceleration clause

Question 23

What is the minimum down payment on an FHA mortgage?

Answer 23

3.5%

Question 24

In a 7/1 ARM, how long is the interest rate fixed…?

Answer 24

7 years

Question 25

A lender typically uses this valuation method when determining the value of a property…?

Answer 25

Market Approach

Question 26

A loan fee equal to one percent of the mortgage amount

Answer 26

Point

Question 27

What is the typical due date for most mortgage payments?

Answer 27

The 1st of the month

Question 28

Claiming a rate of interest on a loan that is greater than that permitted by law is know as?

Answer 28

Usury

Question 29

When a property is sold with a shared equity mortgage, the owners do what with the equity...?

Answer 29

Share the equity

Question 30

John wants to reduce the interest rate on his mortgage by paying additional points to the lender upfront. This is an example of what...?

Answer 30

Buydown

Question 31

In a 10/1 ARM, how long is the interest rate fixed...?

Answer 31

10 years

Question 32

What is the typical annual cap on an adjustable-rate mortgage...?

Answer 32

2%

Question 33

This type of mortgage is considered illegal...?

Answer 33

Negative Amortization Mortgage

Question 34

A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed

Answer 34

Prepayment Penalty Clause

Question 35

What is a borrower required to pay if a mortgage payment is made after the grace period allowed by the bank...?

Answer 35

Late Charge

Question 36

A form of pre-paid interest where one point equals one percent of the loan amount is known as what...?

Answer 36

Discount Points

Question 37

A time past the deadline for an obligation during which a late penalty that would have been imposed is waived is known as what...?

Answer 37

Grace Period