Loan Repayment Plans/Loan Types and Clauses

Question 1

The type of interest usually charged on home loans is:

a. annuity
b. accrued
c. compound
d. simple

Answer 1

D. Simple Interest

Question 2

Interest on real estate loans is normally paid:

a. in arrears
b. in advance
c. on estimated principal
d. annually

Answer 2

A. In arrears

Question 3

If a mortgage loan payment is paid PITI, which portion goes into an escrow (impound) account?

a. interest & taxes
b. taxes & insurance
c. insurance & principal
d. principal & interest

Answer 3

D. Principal and Interest

Question 4

A type of loan in which each payment applies to principal and interest is:

a. amortized
b. package
c. balloon
d. open-ended

Answer 4

A.

Question 5

A loan that is amortized over 30 yrs but calls for the balance to become due at the end of the seventh year is called:

a. balloon
b. blanket
c. purchase money
d. reverse annuity loan

Answer 5

A. Balloon loan

Question 6

The difference between the value and the mortgage balance is called:

a. profit
b. equity
c. loan-to-value ration
d. net value

Answer 6

B. equity

Question 7

A developer needs a loan to cover the purchase of four lots to build homes. The lender would use a ? loan

a. package
b. blanket
c. wraparound
d. super

Answer 7

B. Blanket loan

Question 8

Loan that includes both real and personal property as collateral is a ? loan

a. package
b. purchase money
c. blanket
d. budget

Answer 8

A. Package loan

Question 9

In a construction loan, the funds are released to the borrower:

a. before construction
b. after construction is completed
c. in installments as construction proceeds
d. interest only w/ principal paid at the end

Answer 9

C. installments as construction proceeds

Question 10

Financing Instruments

Financing Instruments:

Promissory Note (Borrower’s IOU)

• Evidence of the Debt
• Terms include:

**Borrower & Lender**Amount of Debt**Interest Rate**Payment

• Does not describe collateral
• usually not recorded

Security Agreement (Mortgage or Deed of Trust) - The security agreement/security instrument explains what is going to happen if buyers don’t repay the loan as promised (foreclosure process)

• Hypothecates property as collateral
• Includes foreclosure provisions
• Includes property legal description
• Recorded to establish lien priority

Question 11

The type of interest usually charged on home loans is

a. annuity interest
b. accrued interest
c. compound interest
d. simple interest

Answer 11

D. simple

Question 12

Interest on RE loans is normally paid

a. in arrears
b. in advance
c. on estimated principal
d. annually

Answer 12

A.

Question 13

If a mortgage loan pmt is paid PITI, which portion goes into an escrow account

a. interest and taxes
b. taxes and insurance
c. insurance and principal
d. principal and interest

Answer 13

D.

Question 14

A type of loan in which each payment applies to principal and interest is

a. amortized
b. package
c. balloon
d. open ended

Answer 14

A.

Question 15

A loan that is amortized over 30 yrs but calls for the balance to become due at the end of the 7th yr is called a

a. balloon loan
b. blanket loan
c. purchase money loan
d. reverse annuity loan

Answer 15

A.

Question 16

The difference between the value and the mortgage balance is called

a. profit
b. equity
c. loan to value ration
d. net value

Answer 16

B.

Question 17

A developer needs a loan to cover the purchase of four lots to build homes. The lender would use a

a. package loan
b. blanket loan
c. wraparound loan
d. super loan

Answer 17

B.

Question 18

A loan that included both real and personal property as collateral is a

a. package loan
b. purchase money loan
c. blanket loan
d. budget loan

Answer 18

A. package

Question 19

The interest rate and monthly payment are subject to periodic changes in a

a. adjustable rate mortgage
b. construction loan
c. package mortgage
d. wraparound mortgage

Answer 19

A.

Question 20

In a construction loan, the funds are released to the borrower

a. all before construction
b. all after construction is completed
c. in installments as construction proceeds
d. interest only w/ principal paid at the end

Answer 20

C.

Question 21

A seller who wants to help a buyer who has an insufficient down payment might suggest a

a. budget mortgage
b. open end mortgage
c. package mortgage
d. purchase money mortgage

Answer 21

D.

Question 22

R sells a property to S for $100,000 with a $30,000 down payment and carries back the balance as a $70,000 note and trust deed. R remains liable for an existing $35,000 first loan. This type of financing is known as

a. wraparound loan
b. blanket loan
c. package loan
d. saving loan

Answer 22

A.

Question 23

The lender makes monthly payments to the borrower in a

a. growing equity mortgage
b. shared appreciation mortgage
c. reverse annuity mortgage
d. balloon mortgage

Answer 23

C.

Question 24

If a real estate company wants to borrow money but doesn’t want the company or the broker to be liable in the even of default, they should execute a

a. personal note
b. recourse note
c. nonrecourse note
d. unsecured note

Answer 24

C.

Question 25

An increase of 1% in interest rate is equivalent to an increase of how many basis points a. 1 b. 10 c. 100 d. 1000

Answer 25

C.

Question 26

The act of extinguishing a debt by regular payments is known as a. depreciation b. amortization c. prepayments d. acceleration

Answer 26

D.

Question 27

A property with an existing loan is sold, the buyer takes ownership, but the lender's permission was not obtained. The lender a. has no recourse against the seller or buyer b. can increase the interest rate c. may call the loan due on sale d. may exercise the defeasance clause

Answer 27

C.

Question 28

A clause that permits the lender to call the entire loan balance due and payable under certain conditions like default is a. acceleration b. acquisition c. alienation d. defeasance

Answer 28

A.

Question 29

A release clause is normally found in a a. installment loan b. blanket loan c. budget loan d. participation loan

Answer 29

B.

Question 30

The clause in a first mortgage that permits a second mortgage to take priority is called a a. subordination clause b. subrogation clause c. substitution clause d. release clause

Answer 30

A.

Question 31

A loan provision that indicates which persons are held personally liable if default occurs is a. carve out clause b. cross collateralization clause c. nonrecourse clause d. non disturbance clause

Answer 31

A.

Question 32

The provision in a mortgage in which the lender agrees not to evict a tenant if a property is acquired through foreclosure is a a. non disturbance clause b. personal guarantee " c. subordination clause d. defeasance clause

Answer 32

A.

Question 33

A loan clause that lenders use to maintain a certain yield on the loan is a a. partial release clause b. personal guarantee " c. non disturbance " d. prepayment clause

Answer 33

D.

Question 34

A clause in a mortgage that states that the lender no longer has an interest in the property is called a a. alienation clause b. satisfaction " c. defeasance " d. release "

Answer 34

D.

Question 35

A clause that allows the lender to declare the loan all due and payable if the property is sold is a a. release clause b. defeasance clause c. alienation clause d. prepayment clause

Answer 35

C. alienation clause AKA Due on sale clause

Question 36

A clause that allows a lender to make an extra charge if the loan is paid off early is a a. due on sale clause b. defeasance clause c. release clause d. prepayment clause

Answer 36

D.

Question 37

A clause in a mortgage that states the mortgage is null and void when the note is paid off is a a. release clause b. acceleration clause c. defeasance clause d. carve out clause

Answer 37

C.

Question 38

A clause calling for individual parcels to be discharged from a blanket loan is a a. release clause b. alienation clause c. acceleration " d. personal guarantee "

Answer 38

A.

Question 39

A clause in which the borrower agrees to be held personally liable for the debt is a a. release clause b. carve out clause c. prepayment " d. defeasance "

Answer 39

B. aka personal guarantee clause

Question 40

List the remaining loan repayment plans: 1. Amortized 2. ? 3. Straight Loan 4. Negative Amortization 5. ?

Answer 40

Budget Loan (PITI) Balloon Payment

Question 41

A loan in which the monthly payment of principal and interest is level and constant is a(n):

Answer 41

Amortized or Fully Amortized

Question 42

The amount of money that is borrowed is the:

Answer 42

Principal

Question 43

Interest on real estate loans is usually ______ interest.

Answer 43

simple interest

Question 44

When one payment on a loan (usually at the end of the loan term) is larger than the regular monthly payment, it is known as a:

Answer 44

Balloon Payment

Question 45

A loan in which the payment includes principal, interest, taxes and insurance is known as a(n):

Answer 45

Budget loan (PITI loan)