REE3043 Exam Questions With Revised
Answers
What two contracts are always involved in a mortgage loan? - answerA note and a mortgage
The two most common types of caps in an adjustable rate mortgage are: - answerPeriodic
and overall
What happens to the balance of a loan with negative amortizati...
What two contracts are always involved in a mortgage loan? - answer✔✔A note and a mortgage
The two most common types of caps in an adjustable rate mortgage are: - answer✔✔Periodic
and overall
What happens to the balance of a loan with negative amortization? - answer✔✔It increases
What is a Balloon Loan? - answer✔✔A loan with an amortization term that determines interest
and principle payments as if it were a fully amortized loan and a shorter term for maturity at
which the remaining loan balance must be paid in full
Of these types of loans, which typically have prepayment restrictions or penalties?
a. Standard home loan.
b. Large home loan.
c. Subprime loan.
d. Commercial property mortgage loan. - answer✔✔Large home loans, subprime loans, and
commercial mortgage loans
Why does a mortgage lender want to be able to pay the property taxes on behalf of a mortgage
borrower? - answer✔✔The property tax lien is superior to the mortgage and can preempt it in
default.
What types of standard home loans are assumable? - answer✔✔Federal Housing Administration
(FHA) and Veterans Affairs (VA)
In practice, lenders commonly define default as occurring when a loan ism____ days overdue. -
answer✔✔90
Depending on the state, the process of foreclosure sale is either by___ or by___ . The method
most favorable to a lender is___ . - answer✔✔Judicial foreclosure; power of sale; power of sale
What law prohibits discrimination in lending by race, sex, religion, and national origin? What
types of income discrimination does it prohibit? - answer✔✔The Equal Credit Opportunity Act
The element of an adjustable interest rate that is the "moving part" is the: - answer✔✔Index
A mortgage loan always creates two documents: a note and a security instrument (the mortgage
or deed of trust). Which of the following items is covered in the security instrument? -
answer✔✔An unambiguous (legal) description of the property that is being pledged as collateral
for the loan
Which of the following types of loans is the most likely to contain a due-on-sale clause? -
answer✔✔Conventional home loan
When, as part of a purchase transaction, a buyer adds her signature to an existing government
(FHA, VA) note, the buyer is said to have acquired the property: - answer✔✔By assumption
Which of the following acts of congress requires important disclosures concerning the cost of
consumer credit, including the computation of the annual percentage rate (APR)? -
answer✔✔Truth-in-Lending Act (TILA)
Which of these points in a mortgage loan would be addressed in the mortgage (possibly in the
note as well)? - answer✔✔Escrows
If the lender in a standard first mortgage wishes to foreclose cost effectively; it is crucial to have
which clause in the mortgage? - answer✔✔Acceleration clause
The characteristics of a borrower that can be considered by a lender in a mortgage loan
application are limited by the: - answer✔✔Require use of a standard settlement statement
available prior to closing
Prohibits kickbacks between vendors of closing-relate services and lenders
Requires borrowers receive a good faith estimate of closing costs soon after applying
A partially amortizing loan always will have - answer✔✔A Ballon Payment
Foreclosure trends to be quickest in states that - answer✔✔Have Power of sale
Which of these statements is true about mortgage loans for income-producing real estate? -
answer✔✔They usually are partially amortizing loans.
With what type of loan security arrangement is the deed held by a neutral third party and
returned upon payment of the mortgage in full? - answer✔✔Deed of Trust
The Truth-in-Lending Act gives some mortgage borrower show long to rescind a mortgage loan?
- answer✔✔3 days
Which statement is correct about the right of prepayment of a home mortgage loan? -
answer✔✔Most home mortgage loans have the right of prepayment without charge, but not all,
and the borrower should check the loan carefully.
Partially amortizing mortgage loans require periodic payments of principal, but are not paid off
completely over the loan's term to maturity. Instead, the balance of the principal amount is paid
at maturity in what is commonly referred to as a: - answer✔✔Balloon Payment
If the lender in a standard first mortgage wishes to foreclose when a borrower is in default, it is
crucial to have which clause in the mortgage? (Hint: otherwise they could only collect
arrearage.) - answer✔✔Acceleration Clause
Which statement is correct about the right of prepayment in a home mortgage loan? -
answer✔✔Dodd Frank Act severely restricted prepayment penalties so that most home mortgage
loans have the right of prepayment without charge, but not all
A mortgage loan always creates two documents: a note and a security instrument (The mortgage
or deed of trust). which of the following items is covered in the security instrument? -
answer✔✔Escrows
To encourage borrowers to accept adjustable rate mortgages (ARMs) rather than fixed rate
mortgages, mortgage originators generally offer an initial short-term introductory rate (i.e. the
start rate) that is significantly less than the prevailing market mortgage rate. This rate is
commonly referred to as a(n): - answer✔✔Teaser Rate
The characteristics of a borrower that can be considered by a lender in underwriting a mortgage
loan application are limited by the: - answer✔✔Equal Credit Opportunity Act (ECOA)
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of
the loan is tied to an index rate that fluctuates over time. Which index is being phased out as a
result of a scandal involving manipulation of the rate by derivatives traders: - answer✔✔London
Interbank Offered Rate (LIBOR)
The difference between the mortgage primary market and secondary market is - answer✔✔that
in the primary market, new loans are created by borrowers and lenders; in the secondary market,
existing loans are sold by one investor to another.
What is a conventional home mortgage loan? - answer✔✔standard home loan that is not insured
or guaranteed by an agency of the U.S. government
Whom does private mortgage insurance protect? Against what? - answer✔✔protects a lender
against losses due to default on the loan
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