Unit 12

Question 1

Which of the following allows a mortgagee to proceed to a foreclosure sale without going to court first?

Answer 1

power of sale

Question 2

A promissory note

Question 3

Which of the following is TRUE about a note?

Answer 3

It is a negotiable instrument.

Question 4

This month, a borrower made the last payment on a mortgage loan. The lender must execute

Answer 4

a satisfaction of mortgage.

Question 5

A $2,400 term loan has a 10% annual interest rate. What is the monthly payment?

Answer 5

$20

Since the annual interest rate is 10%, the monthly interest rate is 10%/12 = 0.00833. The loan has a term of 1 year, so the number of months is 12. Using the formula for a loan of $2,400 with an interest rate of 0.00833, the monthly payment is ($2,400 * 0.00833) / (1 - (1+ 0.00833)^-12) = $20.

Question 6

The seller told the listing broker that the seller’s loan was assumable. Upon reviewing the seller’s loan documents the listing broker found the mortgage was not assumable and the seller would have to pay off the mortgage upon sale. What clause did the listing broker discover upon reading the mortgage document?

Answer 6

Due-on-sale clause

Question 7

A borrower defaulted on a mortgage loan, leaving an unpaid balance of $95,000. After receiving only $85,000 from the sale of the property, the lender filed for

Answer 7

a deficiency judgment.

Question 8

An existing mortgage loan can have its lien priority lowered through the use of

Answer 8

a subordination agreement

Question 9

A credit score can range from

Answer 9

300 to 850

Question 10

In a PITI loan payment, the funds collected to pay for the taxes and insurance that are held in the lender’s reserve or escrow account belong to

Answer 10

the borrower

Question 11

What is the term that refers to a lender charging an interest rate that is higher than that permitted by law?

Answer 11

usury

Question 12

A current loan balance is $118,000 on a 30-year loan at 7% interest, with a monthly payment of $831.63 for principal and interest. How much of the next payment will apply to principal reduction?

Answer 12

$143.30

The answer is $143.30. $118,000 × 0.07 = $8,260 interest per year. $8,260 ÷ 12 = $688.33 interest per month. $831.63 total payment - $688.33 interest = $143.30 applied to principal.

Question 13

The borrower of the note is called

Answer 13

payor

Question 14

A type of foreclosure that allows the property to be sold by court order is

Answer 14

judicial foreclosure

Question 15

The amount of the loan as a percentage of the purchase price of a property is known as

Answer 15

loan-to-value ratio.

Question 16

What is a major disadvantage to lenders of accepting a deed in lieu of foreclosure?

Answer 16

The lender takes the real estate subject to all junior liens.

Question 17

A consumer’s income, outstanding loans, and other financial factors, will be reflected in the consumer’s

Answer 17

credit score.

Question 18

In one state, a lender holds a lien on real property offered as collateral for a loan. The borrower retains both legal and equitable title to real property. If the borrower defaults on the loan, the lender must go through formal foreclosure proceedings to recover the debt. This state can be BEST characterized as what kind of state?

Answer 18

lien theory

Question 19

The borrower under a deed of trust is known as

Answer 19

trustor