Question 1

Recording a mortgage protects the creditor's security interest in the property.

Accepted Answer

A) True 
 B)False  True

Question 2

Dahlia borrows $125,000 from Clearview Credit Union to buy a home. The interest rate and other terms that are required to be disclosed under federal law must be

Accepted Answer

A)  based on uniform formulas of calculation. 
B)  expressed in lenders' language. 
C)  set out in a formula unique to each loan. 
D)  stated in "legalese." 
A)  based on uniform formulas of calculation. 
B)  expressed in lenders' language. 
C)  set out in a formula unique to each loan. 
D)  stated in "legalese." A

Question 3

If a homeowner defaults, the lender has the right to foreclose on the mortgaged property.

Accepted Answer

A) True 
 B)False  True

Question 4

Darwin borrows $200,000 from Evermore Bank to buy a home. Less than six months into the term, Darwin stops making payments on the loan. To initiate the process to repossess and auction off the property securing the loan, Evermore must

Accepted Answer

A)  issue a notice of sale to the borrower. 
B)  offer the property for sale in an auction on the courthouse steps. 
C)  record a notice of default with the appropriate county office. 
D)  resort to litigation to establish clear ownership of the property. 
A)  issue a notice of sale to the borrower. 
B)  offer the property for sale in an auction on the courthouse steps. 
C)  record a notice of default with the appropriate county office. 
D)  resort to litigation to establish clear ownership of the property.

Question 5

The initial interest rate is the part of a purchase price that is paid up front in cash.

Accepted Answer

A) True 
 B)False

Question 6

When an owner is unable to make mortgage payments, a lender may agree to a short sale.

Accepted Answer

A) True 
 B)False

Question 7

An adjustable-rate mortgage is a standard mortgage with an unchanging rate of interest.

Accepted Answer

A) True 
 B)False

Question 8

Denise borrows $90,000 from Clear Lake Credit Union to buy a home. Denise loses her job and fails to make payments on the mortgage, but assures Clear Lake Credit that she will soon secure a new job. The lender agrees to postpone the payments. This is

Accepted Answer

A)  a bridge loan. 
B)  forbearance. 
C)  a reamortization. 
D)  a restructure. 
A)  a bridge loan. 
B)  forbearance. 
C)  a reamortization. 
D)  a restructure.

Question 9

Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracy's equity in her home as collateral, which can be seized if the loan is not repaid on time. With respect to any proceeding that occurs if Tracy fails to make the payments, this loan is subordinated. This means that it

Accepted Answer

A)  takes a higher priority. 
B)  takes a lower priority. 
C)  has the same priority as the primary mortgage. 
D)  fluctuates with the market value of the property. 
A)  takes a higher priority. 
B)  takes a lower priority. 
C)  has the same priority as the primary mortgage. 
D)  fluctuates with the market value of the property.

Question 10

The loan that a lender provides to enable a borrower to purchase real property is a mortgage.

Accepted Answer

A) True 
 B)False

Question 11

Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home. Payments on the loan remain the same for the duration of the mortgage. This is

Accepted Answer

A)  a fixed-rate mortgage. 
B)  an adjustable-rate mortgage. 
C)  an interest-only mortgage. 
D)  a violation of the law. 
A)  a fixed-rate mortgage. 
B)  an adjustable-rate mortgage. 
C)  an interest-only mortgage. 
D)  a violation of the law.

Question 12

A borrower has a right to rescind a mortgage within three business days.

Accepted Answer

A) True 
 B)False

Question 13

A fixed-rate mortgage is a standard mortgage with a rate of interest that changes periodically.

Accepted Answer

A) True 
 B)False

Question 14

Lenders are required to charge prepayment penalties on most subprime mortgages and home equity loans.

Accepted Answer

A) True 
 B)False

Question 15

The annual percentage rate is the actual cost of a loan on a yearly basis.

Accepted Answer

A) True 
 B)False

Question 16

Milo borrows $125,000 from North State Bank to buy a home. To comply with the Statute of Frauds, the mortgage must be

Accepted Answer

A)  a highly formal document. 
B)  a particular form. 
C)  in the same format as the lender's other loans. 
D)  in writing. 
A)  a highly formal document. 
B)  a particular form. 
C)  in the same format as the lender's other loans. 
D)  in writing.

Question 17

A mortgage must be in writing to comply with the Statute of Frauds.

Accepted Answer

A) True 
 B)False

Question 18

With an interest-only mortgage, the borrower can choose to pay only the interest portion of the monthly payment for a specified period of time.

Accepted Answer

A) True 
 B)False

Question 19

A subprime mortgage is a loan made to a borrower who does not qualify for a standard mortgage.

Accepted Answer

A) True 
 B)False

Question 20

Fact Pattern 22-1 
Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes.
-Refer to Fact Pattern 22-1. For Mai's loan, Northeast provides all required disclosures. Mai has a right to rescind the mortgage

Accepted Answer

A)  at any time. 
B)  under no circumstances. 
C)  within three business days. 
D)  within whatever period is most rational and appropriate. 
A)  at any time. 
B)  under no circumstances. 
C)  within three business days. 
D)  within whatever period is most rational and appropriate.

Exam 22: Mortgages Foreclosures After the Recession

Recording a mortgage protects the creditor's security interest in the property.

Dahlia borrows $125,000 from Clearview Credit Union to buy a home. The interest rate and other terms that are required to be disclosed under federal law must be

If a homeowner defaults, the lender has the right to foreclose on the mortgaged property.

Darwin borrows $200,000 from Evermore Bank to buy a home. Less than six months into the term, Darwin stops making payments on the loan. To initiate the process to repossess and auction off the property securing the loan, Evermore must

The initial interest rate is the part of a purchase price that is paid up front in cash.

When an owner is unable to make mortgage payments, a lender may agree to a short sale.

An adjustable-rate mortgage is a standard mortgage with an unchanging rate of interest.

Denise borrows $90,000 from Clear Lake Credit Union to buy a home. Denise loses her job and fails to make payments on the mortgage, but assures Clear Lake Credit that she will soon secure a new job. The lender agrees to postpone the payments. This is

Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracy's equity in her home as collateral, which can be seized if the loan is not repaid on time. With respect to any proceeding that occurs if Tracy fails to make the payments, this loan is subordinated. This means that it

The loan that a lender provides to enable a borrower to purchase real property is a mortgage.

Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home. Payments on the loan remain the same for the duration of the mortgage. This is

A borrower has a right to rescind a mortgage within three business days.

A fixed-rate mortgage is a standard mortgage with a rate of interest that changes periodically.

Lenders are required to charge prepayment penalties on most subprime mortgages and home equity loans.

The annual percentage rate is the actual cost of a loan on a yearly basis.

Milo borrows $125,000 from North State Bank to buy a home. To comply with the Statute of Frauds, the mortgage must be

A mortgage must be in writing to comply with the Statute of Frauds.

With an interest-only mortgage, the borrower can choose to pay only the interest portion of the monthly payment for a specified period of time.

A subprime mortgage is a loan made to a borrower who does not qualify for a standard mortgage.

Fact Pattern 22-1 Northeast Bank makes mortgage loans to consumers, including Mai, to buy homes. -Refer to Fact Pattern 22-1. For Mai's loan, Northeast provides all required disclosures. Mai has a right to rescind the mortgage

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