rep ch 9

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rep ch 9
2011-12-12 22:54:25
rep ch9

rep ch9
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  1. 1. What document is used to hypothecate title to personal property, as opposed to real property?
    A. Bill of sale
    B. Chattel mortgage
    C. Security agreement
    D. Certificate of clearance
    • Question #1
    • Answer: C
    • Explanation: A security agreement is the security instrument used to secure a loan for the purchase of personal property. A bill of sale is the instrument that actually transfers title to personal property.
  2. 2. The Federal Reserve could create a tight money market by:
    A. lowering the discount rate
    B. raising the discount rate and buying bonds
    C. buying bonds
    D. raising the discount rate and selling bonds
    • Question #2
    • Answer: D
    • Explanation: To create a tight money market, the Federal Reserve would take actions that reduce the amount of funds available to lend. It would do so by raising key interest rates (the discount rate and the federal funds rate), raising reserve requirements, and selling bonds.
  3. 3. A purchase money first mortgage will take priority over:
    A. real property tax liens
    B. all liens against a property at the time of sale
    C. any subsequently recorded liens against the property
    D. a construction loan where the project began after the first mortgage was recorded
    • Question #3
    • Answer: C
    • Explanation: A purchase money mortgage is any loan taken out to finance the purchase of real property that will be secured by that property. Therefore, it can't take priority over liens that were previously recorded (unless they had a subordination clause) or over tax liens.
  4. 4. If a lender charges an interest rate greater than that allowed by law, it is known as:
    A. penury
    B. usury
    C. plottage
    D. extortion
    • Question #4
    • Answer: B
    • Explanation: Usury laws are state laws that make it illegal to charge more than a maximum interest rate on certain loans.
  5. 5. Which of the following is the best definition of a prepayment penalty?
    A. A fee paid by a trustor when he pays some of the debt in advance
    B. A fee paid by a trustor when he is late in paying his monthly payment
    C. A fee paid by a trustor to lock in an interest rate on a loan until closing
    D. A fee paid by a buyer in order to assume an existing loan
    • Question #5
    • Answer: A
    • Explanation: A prepayment penalty is paid by a borrower who pays off debt in advance. Prepayment penalties are uncommon in residential mortgages.
  6. 6. Which party to a deed of trust would execute a deed of reconveyance?
    A. Mortgagor
    B. Beneficiary
    C. Trustee
    D. Trustor
    • Question #6
    • Answer: C
    • Explanation: The trustee will sign the deed of reconveyance and deliver it to the trustor. The trustee should also record the deed of reconveyance to release the property from the lien.
  7. 7. If a lender "calls" a note, that means he:
    A. forecloses on the property
    B. demands payment of delinquent loan installments
    C. allows a purchaser to take title subject to the loan
    D. accelerates the loan
    • Question #7
    • Answer: D
    • Explanation: If a lender defaults on a note subject to an acceleration clause in the mortgage or deed of trust, the lender will "call" the loan. This will require the borrower to pay the loan amount in full.
  8. 8. Which of the following is a type of note where only interest is paid during its term?
    A. Straight note
    B. Amortized note
    C. Installment note
    D. Cognovit note
    • Question #8
    • Answer: A
    • Explanation: A straight note is an interest-only note, where the borrower will pay off the interest during the loan term and then pay the entire principal balance as a balloon payment at the end of the loan term.
  9. 9. Which pair of loans is synonymous?
    A. Interim loan/takeout loan
    B. Takeout loan/standby loan
    C. Construction loan/interim loan
    D. Construction loan/progressive payment loan
    • Question #9
    • Answer: C
    • Explanation: A construction loan is a temporary loan, so it's also known as an interim loan. A takeout loan is permanent financing obtained once construction is complete.
  10. 10. A land contract may be described as a substitute for a note and a deed of trust. In this way, a land contract is:
    A. an option agreement
    B. a three-party instrument
    C. a security device
    D. identical to a mortgage
    • Question #10
    • Answer: C
    • Explanation: When it is used as an alternative financing arrangement, a land contract is a security device. Under a land contract, the vendor continues to hold legal title to the property during the repayment period.
  11. 11. A subordination clause in a deed of trust will:
    A. prohibit the trustor from obtaining another loan before the existing loan is paid in full
    B. permit the trustor to pay off the loan in full before the end of the loan term
    C. require the acceleration of the loan in the event the property is sold
    D. give priority to subsequent loans over the existing loan
    • Question #11
    • Answer: D
    • Explanation: A subordination clause places the existing loan in a lien priority position inferior to that of subsequent loans.
  12. 12. A mortgage contains a provision requiring the lender's approval before the loan can be assumed. Such a provision is:
    A. unenforceable
    B. valid
    C. void
    D. voidable
    • Question #12
    • Answer: B
    • Explanation: Alienation clauses, which allow the lender to call the loan if the property is sold, are common in conventional loans. Under an alienation clause, a lender may approve an assumption of the loan by a proposed buyer.
  13. 13. A statement regarding a promissory note that lists the principal balance, interest rate, and amount and schedule of payments, is a/an:
    A. beneficiary statement
    B. offset statement
    C. certificate of discharge
    D. subordination clause
    • Question #13
    • Answer: B
    • Explanation: An offset statement is obtained from a property owner when a mortgage or deed of trust is assigned to an investor. Don't confuse it with a beneficiary statement, which contains similar information but is obtained from a lender.
  14. 14. If a trustor defaults on a deed of trust, the most expedient remedy available to the beneficiary is a/an:
    A. judicial foreclosure
    B. sheriff's sale
    C. trustee's sale
    D. unlawful detainer action
    • Question #14
    • Answer: C
    • Explanation: The principal advantage of deed of trust foreclosure is that a trustee's sale may be held within months of the default, rather than waiting through a judicial foreclosure, sheriff's sale, and redemption period.
  15. 15. A buyer purchased a property for $700,000 and made a downpayment of $140,000. He borrowed the remainder of the purchase price. This would be considered a purchase money mortgage if it came from:
    A. the seller
    B. a conventional lender
    C. the buyer's sister-in-law
    D. All of the above
    • Question #15
    • Answer: D
    • Explanation: In its broadest sense, a purchase money mortgage is any loan used to purchase real property where the property will be used as security. It can come from any source: the seller, a bank, even a friend or relative.