Gerard has been offered a 4% interest rate on a $300,000 mortgage. His monthly mortgage payment would run about $950 per month. He plans to pay $2,000 up front to drop his interest rate to 3.75% and his payment to $920 per month. What is this upfront charge called?
Discount point
Interest
Notes
Usury
A trustee is holding title to Cassandra’s house until the loan is paid in full. Which type of security instrument was used?
Deed of trust
Mortgage
Mortgage and deed of trust
Promissory note
Alyssa’s mortgage loan is secured by the note and the mortgage. Which of the following is true if she lives in a lien theory state?
Her lender can foreclose on her without advance notice.
She holds title to the property, and the mortgage becomes a lien on the property.
The lender can never legally foreclosure on her home.
The lender doesn’t need to involve the court to foreclose.
What type of foreclosure is commonly used when a mortgage is the security instrument?
Eviction
Judicial
Non-judicial
Strict
Rob and Jill obtained a mortgage from Taylor Bank & Trust in 1998. In 2014, they obtained a second mortgage from Quail Loans. What is the loan with Quail Loans considered?
First mortgage
Graduated mortgage
Home equity line of credit
Junior mortgage
Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?
Acceleration
Alienation
Defeasance
Due-on-sale
Which of the following is a promise from the borrower to repay a certain sum of money to another party (the lender or holder of the note) under specified terms?
Deed of trust
Mortgage lien
Promissory note
Usury
Jason purchased his dream home six months ago. After Jason received an inheritance from his uncle, he decided to pay off his mortgage. What should he consider before doing this?
A second mortgage
The state of his local housing market
Whether he will incur a prepayment penalty
Whether his uncle would like this
Jim decided to refinance his three-year-old mortgage that has a balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called?
A prepayment penalty
Closing costs
Origination fee
Points
What type of foreclosure is commonly used when a deed of trust is the security instrument?
Eviction
Judicial
Non-judicial
Strict
Stacy has gone into default on her mortgage. Her lender is demanding that the entire loan balance be paid in full. Which mortgage clause permits her lender to do this?
Acceleration
Alienation
Defeasance
Due-on-sale
What’s an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires?
Discount point
Interest
Note
Usury
In a title theory state, which of the following is a true statement?
A promissory note creates a lien against the property used as security for the loan.
It’s generally much easier for a lender to foreclose on a property.
The lien makes non-judicial foreclosure typical.
The mortgage creates a lien against the property used as security for the loan.
What purpose does the promissory note serve?
It gives the lender the right to begin foreclosure proceedings if the buyer defaults.
It gives the trustee the right to begin foreclosure proceedings if the buyer defaults.
It’s a promise made to the buyer that the lender will not foreclose as long as the note is kept current.
It’s a promise the buyer makes to the lender that the note will be repaid in full.
Which of the following defines when a lender charges a borrower more than the highest allowable interest rate?
Default
Discount points
Note
Usury
Which of the following is a mortgagor’s responsibility?
Assign the mortgage.
Charge late payment penalties.
Foreclose on the property if in default.
Keep the property in good repair.
Elaina and Allen just purchased a home using a deed of trust. Which of the following is most likely true about their home loan?
A trustee will hold title until the loan is paid.
Their transaction is secured with a mortgage as well.
The lender will hold the mortgage, while a trustee will hold the deed of trust until their loan is paid off.
The lender will hold the title until the loan is paid off.
What’s a promissory note?
A lien on a property
An agreement for a consumer to buy a new condominium
The borrower’s promise to repay a certain sum of money to another party (the lender or holder of the note) under specified terms
The lender’s promise to repay a certain sum of money to another party
A buyer is reviewing the Loan Estimate they received from their lender. What should the buyer do if they notice the loan terms include a prepayment penalty?
Ask the lender if there are other options available that would not involve a prepayment penalty.
Check with their real estate agent to make sure that the penalty shown is typical.
Laugh and throw the Loan Estimate in the trash.
Resolve to not try to pay the loan off early.
Daniel purchased a townhome and obtained financing from Bank A on February 1, 2014. On April 1, 2015, he took out a home equity loan on the property with Bank B. On August 1, 2015, Daniel refinanced his mortgage through Bank C, which resulted in Bank A’s loan being paid off. Bank B signed a subordination agreement related to Bank C’s loan. Which lender will be paid first in the event of a foreclosure?
Bank A
Bank B
Bank B and C will be paid at the same time.
Bank C
How many parties does a mortgage involve?
Five: borrower, lender, trustee, trustor, and beneficiary
Four: borrower, lender, trustee, and trustor
Three: borrower, lender, and trustee
Two: borrower and lender
When a mortgage is used as a security instrument, who holds the mortgage and the promissory note?
The borrower holds the mortgage, and the lender holds the note.
The borrower holds the mortgage and the note.
The lender holds the mortgage, and the borrower holds the note.
The lender holds the mortgage and the note.
Phyllis and Maury obtained a mortgage from Taylor Bank & Trust in 1998. In 2014, they obtained a second mortgage from Quail Loans. What’s the loan with Taylor Bank & Trust considered?
First mortgage
Home equity line of credit
Junior mortgage
Subordinate mortgage
When a deed of trust is used as a security instrument, who holds the deed and the note?
The lender holds the deed and the note
The lender holds the deed, and the trustee holds the note.
The trustee holds the deed, and the lender holds the note.
The trustee holds the mortgage and the note.
Shirley’s lender discharged the mortgage lien on Shirley’s property after processing her final payment. Which clause requires the lender to take this action?
Acceleration
Alienation
Defeasance
Due-on-sale
If a negotiable instrument is transferrable, it must be ___________.
Include a “not to exceed” clause
On a government-issued form
Payable at an indefinite time
Signed
Upon examination of his mortgage document, Jared finds a clause stating he will owe additional interest if he pays off his loan within one year of the loan origination date. What type of penalty does this describe?
Acceleration
Alienation
Defeasance
Prepayment
In a mortgage, the property is used as collateral for the loan. What’s the term for the process of pledging something as collateral?
Hypercollateral
Hyperinflation
Hyperventilation
Hypothecation
Sondra, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Sondra falls on hard times and misses multiple payments, and the bank indicates that it’s going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Sondra holds the deed to the land. What kind of state does Sondra live in?
A deed of trust theory state
A lien theory state
An intermediary theory state
A title theory state
Which one of the following is a true statement regarding prepayment penalties?
All loans involve prepayment penalties.
Lenders don’t have to tell borrowers about prepayment penalties until the borrower’s payoff amount is received.
Lenders must disclose up front if they reserve the right to charge a prepayment penalty, and under what conditions a penalty will apply.
Prepayment penalties are illegal.
What generally determines the priority of a lien?
The amount of the lien
The date it is recorded
The date the lien is to be paid off
The lien holder
What’s the purpose of a typical subordination agreement?
It allows a new junior mortgage to move into first lien position.
It cancels a lien that is no longer enforceable.
It removes a lien from a property when it’s been repaid.
To cancel a lien that is no longer enforceable
Which of the following statements about the promissory note is true?
A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note’s terms.
A promissory note isn’t a legal document.
A promissory note isn’t transferable, so it must be held by the original lender until paid in full.
A promissory note serves as collateral for a mortgage loan.
Who or what entity has legal title to a financed property in a lien theory state?
The beneficiary
The borrower
The lender
The state
What’s a discount point?
An upfront charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires
The amount a borrower charges a lender for using its money, charged either monthly or annually
The amount a lender charges to initiate a loan
The interest rate at which a bank is allowed to borrow money from the Fed; this rate changes with the stock market
After getting into a fender bender, Parker had to buy a new car. To make the down payment on the car, he had to skip a couple of his mortgage payments. He received a notice from his lender indicating the remaining amount of his loan is due immediately and in full. What clause in his mortgage stipulates this?
Acceleration
Alienation
Defeasance
Due-on-sale
Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?
The lender releases the deed of trust that secured her mortgage loan.
The lender releases the mortgage that secured her mortgage loan.
The lender tells the trustee to release the title to Olivia.
The trustee releases the mortgage that secured her mortgage loan.
Which of the following options describes a subordination agreement?
An agreement between a contractor and any subcontractors
An agreement between a landowner and a contractor
An agreement between the court and landowner to decrease property taxes
An agreement between two lien holders to modify the order of lien priority
Which of the following documents is an example of a promissory note?
Borrower Keesha just signed a document that states that she pledges to pay back her mortgage loan of $310,000.
First Financial drafted a document for a borrower that includes, among other things, an acceleration clause.
The document that Darren is about to sign includes an acceleration clause.
The document that Sandra will sign also includes spaces for her lender’s and her trustee’s signatures.
Generally, there are covenants between the borrower and the lender within a mortgage document. Which of the following is a mortgage covenant?
Agree to refinance only with the current lender.
Give the lender first right of refusal.
Move all checking and savings account to the lender’s institution.
Pay any charges and assessments against the property.
Which of the following describes the amount a lender charges a borrower for using money?
Discount point
Interest
Principal
Usury
While Martha’s paying off her loan, her lender is holding on to something that includes her name, property address, the interest rate on her loan, what the late charge amount would be, and the amount and term of the loan. When her loan is paid off, the lender returns it to Martha, marked paid in full. What is this item?
A deed of trust
A mortgage
An assignment
A promissory note
Which one of the following examples describe a prepayment penalty?
A fee the government charges the lender if the borrower pays off a loan before its intended time
A fee the lender charges for servicing a loan
A loan origination fee charged to the borrower
A monetary penalty imposed on a borrower for paying off a loan before its intended time
In title theory states, which of the following is true?
The borrower and lender hold the title jointly.
The borrower doesn’t hold the legal title to the property until the loan is paid in full.
The borrower receives the title at closing.
The lender is not allowed to hold the title.
Which of the following is one reason a lender might charge a prepayment penalty?
Because the lender is a subprime lender
To cover the costs of processing an early payoff
To deter buyers from ever paying off their mortgage
To recover the money lost in anticipated interest
How can a lender with a lien that’s in second position get into the first position?
With a deed of trust
With an IOU
With a promissory note
With a subordination agreement
Which of the following is the name of a penalty lenders charge when borrowers repay their loans earlier than expected?
Discount point
Late fee
Prepayment penalty
Usury
Janice is selling her property, and Tim wants to assume her loan. If a due-on-sale clause exists in Janice’s mortgage, ______.
Janice will have to pay any loan assumption fee
The entire loan balance may be due at once, and Tim won’t be able to assume it
The interest rate will rise with the assumption
Tim will have to accept existing terms of the loan
Where are mortgages recorded?
Mortgages are not recorded; only deeds are.
They’re recorded at the lending bank’s main office.
They’re recorded at the real estate brokerage’s main office.
They’re recorded at the recorder’s office in the county where the property is located.
Rusty received an acceleration letter from his mortgage lender. What is the most likely reason for receiving this letter?
Rusty failed to pay his property taxes.
Rusty has paid off his mortgage.
Rusty is two or three months in default.
Rusty’s mortgage is being sold on the secondary market.
A mortgage is a legally binding document that creates a lien on a piece of property and gives the lender the right to foreclose on the property if the borrower defaults. Who or what entity is considered the mortgagee?
Borrower
Lender
Loan
Property
12sect.unit2.CeSh.PreLic.Qonly.txt
Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin’s equity?
$114,300
$187,700
$214,300
$254,200
ABC Lending requires mortgage borrowers to prepay 12 months of property taxes and insurance at closing. Where must these funds be held?
Brokerage account
Escrow account
Safe
Savings account
Your clients Earnestine and Sammie Griffin are financing $180,970 for a $500,000 home. The Griffin’s lender will approve an interest rate of 4.5% if they pay two discount points at closing. How much is this?
$10,000
$3,619.40
$6,380.60
$8,143.65
A buyer is purchasing a property for $400,000. His lender’s loan-to-value ratio is 80%. How much is the buyer financing?
$320,000
$360,000
$400,000
$80,000
A buyer with a 20-year, $419,000 loan at a 4.25% interest rate has a monthly principal and interest payment totaling $2,594.59. If $1,483.95 is interest, how much is applied toward principal for that payment?
$1,110.64
$1,246.10
$1,578.57
$1,780.75
Your buyer client, Max, just signed a purchase agreement for a $520,000 home. He has a 60% LTV ratio, and his lender’s charging a 1.5% loan origination fee. What loan origination fee can Max expect to pay at closing?
$2,200
$3,120
$4,200
$4,680
A buyer is purchasing a home for $400,000 and is financing $300,000. What is the loan-to-value ratio?
72%
75%
82%
96%
What may happen if a property lies in a designated floodplain?
Flood insurance may be required.
Lenders will not approve a loan.
The property may float away.
The property will never sell.
Edric owes $115,000 on his lakefront home, which he’s selling for $350,000. He’s spent $73,000 in major renovations, and he wants to take that expense into consideration when he calculates how much he’ll actually pocket at closing. What number does he come up with?
$162,000
$235,000
$277,000
$308,000
Which program helps homeowners in flood hazard areas obtain insurance?
Federal Emergency Management Act
Flood Alleviation Program
National Flood Insurance Program
Safe Drinking Water Act
A buyer has a 15-year, $250,000 loan with a 5.5% interest rate. How much of the first monthly payment is interest?
$1,145.83
$13,750.28
$1,388.89
$916.67
The Gatlins’ lender tells them they can afford a monthly payment of $1,830 on their new home loan. What interest rate are the Gatlins getting if this is an interest-only loan with a principal balance of $349,000?
0.524%
5.24%
6.29%
6.39%
A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a one-point loan origination fee. How much is the loan origination fee?
$3,200
$3,600
$4,000
$800
Joyce just closed on a condo valued at $366,900 and put down 20% to obtain an 80% loan and avoid having to pay for private mortgage insurance. How much equity does she have in her condo?
$146,760
$220,140
$293,520
$73,380
A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What’s the amount of the loan origination fee if the lender charges one-and-a-half points?
$5,000
$6,750
$750
$7,500
A buyer with a 30-year, $750,000 loan at a 5.75% interest rate has a monthly principal and interest payment totaling $4,376.80. If $3,593.75 is interest, how much is applied to principal?
$251.66
$3,593.75
$4,376.80
$783.05
What often comprises the sum total of a buyer’s mortgage payment?
Principal and interest
Principal and taxes
Principal, interest, and taxes
Principal, interest, taxes, and insurance
Another closing appointment is approaching. These clients are purchasing a $160,000 home. If they have a down payment of 25% and the bank charges and origination fee of two points at closing , how much are they paying in points?
$2,400
$2,450
$2,475
$3,200
With which type of amortization does the amount applied toward the principal remain the same each month, with the interest amount varying according to the outstanding loan balance?
Constant payment
Graduated payment
Negative amortization
Straight-line
A buyer is purchasing a property for $500,000. His lender’s loan-to-value ratio is 90%. How much is the buyer financing?
$400,000
$450,000
$50,000
$500,000
A homeowner has $80,000 of principal left to pay on the mortgage. The home was recently appraised at $156,000, which is $13,000 more than the purchase price. How much equity does the homeowner have?
100%
$13,000
$76,000
$80,000
What’s it called when a borrower’s installment payment remains relatively the same over the life of the loan?
Constant payment method
Graduated payment
Negative amortization
Straight loan
Gary has an 80% LTVR on his new $318,000 townhome with an annual interest rate of 4.125%. What’s his interest payment the first month?
$1,093.13
$1,126.25
$874.50
$901
Who or what determines the amount that can be set aside in reserve funds?
Borrowers
Builders
Federal regulations
Lenders
What’s a reserve fund?
An account brokers use to pay commissions to licensees
A specified number of months’ worth of property tax and insurance funds that have been set aside
The amount of money a bank reserves for mortgage lending
The amount of money lenders keep on hand
You’re working with buyers who are pre-approved for a loan of as much as $200,000. Assuming they lock in a 5.25% interest rate at closing, how much of their first payment will go toward interest?
$824
$825
$874
$875
You’re working with a buyer who’s purchasing a home that appraised at $80,000. The buyer is obtaining a 90% loan, and the lender will charge a one-point origination fee at closing. How much will the loan origination fee be?
$712
$720
$728
$800
Which of the following describes a buydown?
ABC Lending charges origination points and offers a 4.5% rate.
Buyers pay the seller a prepaid lump sum prior to closing to reduce the sales price.
Your clients opt to pay their lender two discount points in a lump sum so they can lock in a reduced interest rate.
Your sellers pay some of the buyer’s closing costs so the buyer can put more money to their down payment.
Which of the following is generally true of flood insurance?
It is a standard part of any homeowners policy.
It is optional for all properties.
It is required by lenders for all properties.
It is usually purchased separately or bundled with a homeowners policy, but it’s not standard.
Your client Ellis is purchasing a property for $520,000. He made a down payment of $200,000 and plans to finance $320,000. What is the LTV ratio as rounded to the nearest percentage?
50%
55%
62%
65%
A discount point equals 1% of the _______.
Appraised value
List price
Loan amount
Sales price
Juan secures a fixed rate amortized 30-year loan for $295,000 at 4.25%. If his monthly P&I payment is $1,750, how much interest does he pay in the second month of the loan?
$1,038.59
$1,042.29
$1,044.79
$1,750
A buyer has a 30-year, $750,000 loan with a 5.75% interest rate. How much of the first monthly payment is interest?
$10,869.57
$3,500.93
$3,593.75
$3,750.27
Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase?
$208,000
$220,000
$300,000
$312,000
Nina and Rob prepaid some of their interest to their lender when financing their new home. What’s this called?
A buydown
A down payment
An adjustable rate mortgage
An interest-free loan
Jane is purchasing a property for $310,000 and plans to finance $250,000. What is the loan-to-value ratio? (Round to the nearest percentage.)
79%
81%
83%
85%
Lisa took out a conventional 30-year mortgage at a 6% interest rate when she bought her home 15 years ago. Her payments today are the same as they were when she made her first payment. What’s this an example of?
Constant payment method
Graduated payment
Home equity line of credit
Straight loan
A reserve fund may also be called a(n) ______ account.
Additional
Escrow
Insurance
Taxable
A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month’s mortgage payment is interest?
$2,333.33
$28,000
$3,100
$933.33
Which of the following describes a buydown?
ABC Lending charges origination points and offers a 4.5% rate.
Buyers pay the seller a prepaid lump sum prior to closing to reduce the sales price.
Your clients opt to pay their lender two discount points in a lump sum so they can lock in a reduced interest rate.
Your sellers pay some of the buyer’s closing costs so the buyer can put more money to their down payment.
A buyer is purchasing a home for $400,000 and is financing $300,000. What is the loan-to-value ratio?
72%
75%
82%
96%
Stu’s seller client, Gabi, wants to figure out how much equity she has in the home she’s selling. Gabi paid $200,000 eight years ago and made several great renovations over the years. She still owes $125,000. Stu calculates that comparable home values in her area have risen about 15% since Gabi bought. Assuming Stu pulled appropriate comps, about how much equity does she have?
$105,000
$155,000
$205,000
$230,000
Your buyer clients, the Fowlers, obtained an 80% loan on their $600,000 home. At closing, they paid $8,400 for discount points. How many points did the Fowlers pay to lower their interest rate?
0.017
1.17
1.75
7.2
Grant and Adela arrange a $150,000 loan at 4.5% annual interest with their lender. What’s their monthly interest amount?
$550.25
$562.50
$570
$575.75
Evelyn’s mortgage payments fluctuate. The amount applied toward principal each payment remains the same, but the interest amount varies. What type of amortization is this?
Constant payment
Negative amortization
Standard amortization
Straight-line amortization
What might a borrower’s escrow account or reserve fund pay for?
Insurance and taxes
Insurance only
Late fees
Taxes only
Maddy is looking over some documents while preparing for the closing of her first home purchase. She sees that her lender requires six months prepayment of this in her escrow account.
Insurance and taxes
Insurance only
Late fees
Taxes only
Your buyer clients have plenty for a down payment and closing costs, and they’d like a lower interest rate than the going rate. How can they use some of their saved funds to get a better interest rate?
They can buy down the interest rate.
They can eliminate the interest rate.
They can postpone paying interest for a certain amount of time.
They can’t use funds to get a better interest rate.