Deck 16: Mortgages Foreclosures After the Recession

Question 1

Federal mortgage disclosure requirements apply to the written materials that a lender provides and to any oral representations.

Answer 1

False

Question 2

A deficiency judgment requires a borrower to pay the amount of debt remaining after the collateral is sold.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Foreclosure is the postponement,for a limited time,of part or all of the payments on a loan in jeopardy of repossession and sale.

Question 5

Steering and targeting occur when a lender manipulates a borrower into accepting a loan product that benefits the lender but is not the best loan for the borrower.

Question 6

With an adjustable-rate mortgage,the rate of interest paid by the borrower changes periodically.

Question 7

Home equity is the portion of a home's value that is "paid off."

Question 8

A lender's failure to comply with federal mortgage disclosure requirements extends the borrower's right to rescind the loan to no more than seven days.

Question 9

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

Question 10

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

Question 11

Lenders can require balloon payments for loans with terms of five years or less.

Question 12

In a judicial foreclosure,the lender is allowed to foreclose on and sell the property without judicial supervision.

Question 13

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

Question 14

Due to a lower default rate,lenders charge a lower interest rate for subprime loans.

Question 15

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

Question 16

A reverse mortgage starts as a fixed-rate mortgage and then converts into an adjustable-rate mortgage.

Question 17

Borrowers are required to recite the terms of their loans in clear,readily understandable language so that lenders can make rational choices.

Question 18

Federal law encourages private lenders to modify mortgages so as to lower the monthly payments of borrowers who are in default.

Question 19

A lender can make a higher-priced mortgage loan based on the value of the consumer's home without verifying the consumer's other credit obligations.

Question 20

There are additional disclosure requirements for a higher-priced mortgage loan.

Question 21

Money Mortgage Mart makes a short-term loan to Natalie to allow her to make a down payment on a new home before selling her current home.This is

A)a bridge loan
B)a home equity loan.
C)an equitable right of redemption.
D)a violation of federal law.

Question 22

Kenton borrows $150,000 from Liberty Home Finance Corporation to buy a home.Federal law concerns primarily

A)borrowers' ability to avoid clear terms in financing documents when the effect may be harsh.
B)how many loans a specific lender can make.
C)the highest prices for which real property can be sold.
D)what must be disclosed with respect to a mortgage.

Question 23

Harbor Bay Bank has made mortgage loans to consumers that qualify for the Home Affordable Modification Program (HAMP),which offers incentives to lenders to change the terms of certain loans.The purpose of HAMP is to

A)convey property through lenders to consumers who can afford it.
B)force lenders to forgive all high-risk mortgages.
C)reduce monthly payments to levels that homeowners can pay.
D)transfer affordable property to investors to lease to consumers.

Question 24

Ruth owns a home on which she has two mortgages provided by Security Bank.Town Refinance Inc.tells Ruth that it can refinance the loans to reduce her payments.Town Refinance provides all of the required documents,which accurately state the payments under the new loan as higher.Ruth does not read the documents.Town Refinance is most likely liable for

A)fraud.
B)misrepresentation.
C)negative amortization.
D)nothing.

Question 25

Jaime buys a home by paying part of the purchase price up front in cash and borrowing the rest of the funds from Valley Credit Union.The part of the price paid up front in cash is

A)a down payment.
B)a home equity loan.
C)a reverse mortgage.
D)the average prime offer rate.

Question 26

Lorna borrows $175,000 from Mountainside Credit Union to buy a home.Among the terms that must be disclosed under federal law is the annual percentage rate.This is

A)the actual cost of the loan on a yearly basis.
B)the average prime offer rate.
C)the interest rate at which the loan is made.
D)the loan principal.

Question 27

Rita borrows $30,000 from South State Credit Union.South State accepts Rita's equity in her home as collateral,which can be seized if the loan is not repaid on time.This is

A)a home equity loan.
B)a hybrid mortgage.
C)a reverse mortgage.
D)a violation of the law.

Question 28

Hubert borrows $100,000 from Integrity Mortgage Mart to buy a home.Soon after obtaining the mortgage,Integrity convinces Hubert to refinance.This is

A)a short sale. b a subprime mortgage.
C)loan flipping.
D)steering and targeting.

Question 29

Fact Pattern
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
Refer to Fact Pattern 16-1A.Under federal law,if 24-Hour Credit fails to provide certain material disclosures with respect to the loan,Benny's right to rescind the loan

A)expires at midnight on the day the loan is finalized.
B)is immediately revoked.
C)is extended for up to three years.
D)is tolled for the duration of the loan payments.

Question 30

Great Plains Bank provides a loan to enable Helene to buy real property.This loan is

A)a down payment.
B)a mortgage.
C)a short sale.
D)a workout agreement.

Question 31

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

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 32

Main Street Lenders,Inc. ,attempts to coerce Nolan-who specializes in determining the value of real and personal property-into misstating the value of a property on which a loan is to be issued.This is

A)a legal and ethical-but morally arguable-financial ploy.
B)a legal-but unethical-business practice.
C)a necessary tactic to generate a profitable loan in today's market.
D)a violation of the law.

Question 33

Property Financial Corporation makes loans that qualify,under a Federal Reserve Board amendment to Regulation Z,as Higher-Priced Mortgage Loans (HPMLs).Quinn applies to Property Financial for an HPML.To make the loan,the lender must

A)convince an appraiser to inflate the value of the property.
B)impose a prepayment penalty for the duration of the loan.
C)structure the loan to specifically evade the HPML protections.
D)verify the borrower's ability to repay the loan.

Question 34

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

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

Question 35

Fact Pattern
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
Refer to Fact Pattern 16-1A.Under federal law,disclosures with respect to one of 24-Hour Credit's loans must be provided

A)a certain number of days after the loan is finalized.
B)a certain number of days before the loan is finalized.
C)at the same time at which the loan is finalized.
D)at whatever time is most rational and appropriate.

Question 36

Consumer Mortgage Loans provides Demi with a mortgage to buy a home.Under the terms,Demi can choose to pay only the interest portion of the monthly payments and forgo paying of the principal for five years.This is

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

Question 37

Ridgeline Bank provides Stanley with a mortgage to buy a home.The rate of interest is fixed for three years and then adjusts annually.This is

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

Question 38

Velma borrows $110,000 from Watershed Bank to buy a home.If she fails to make payments on the mortgage,the bank has the right to repossess and auction off the property securing the loan.This is

A)a short sale.
B)forbearance.
C)foreclosure.
D)the equitable right of redemption.

Question 39

Reed borrows $150,000 from Suburban Credit Union to buy a home,which secures the loan.Three years later,Reed stops making payments on the loan.After Suburban Credit repossesses and auctions off the property to Tyler,equity remains.This amount most likely belongs to

A)Reed.
B)Suburban Credit Union.
C)Tyler.
D)the county in which the property is located.

Question 40

Seymour borrows $350,000 from Reliable Bank to buy a home.Seymour stops making payments on the loan ten months later.After the bank repossesses the property securing the loan but before it is sold,Seymour wants to buy it.This is

A)a deficiency judgment.
B)a reverse mortgage.
C)a violation of the law.
D)the right of redemption.

Question 41

Kim's home is valued at $250,000.Kim has paid the mortgage-she has 100 percent equity in the property.She wants to start a new business with Lloyd.To obtain funds,Kim refinances the loan through Metro Bank,borrowing $200,000 for fifteen years at an interest rate of 4.85 percent.Before the loan is completed,Metro provides Kim with all of the required disclosures.On the day of the loan,a fifteen-year Treasury bond is yielding 2.85 percent.Kim pays $7,500 in fees to the bank.Less than a month later,she sells her interest in the new business to Lloyd and wants to rescind the loan.Which federal law covers this loan-TILA,HOEPA,HPML,or HAMP? Can Kim rescind the deal? Explain.

Question 42

Brendan borrows $150,000 from Countywide Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.5 percent with a thirty-year term secured by Brendan's home,which is his principal residence.When Brendan has paid off $10,000 of the mortgage-still owing $140,000-he loses his job and defaults on the loan.The market for homes has declined since Brendan took out the loan,and the value of the home at the time of default is $100,000.Despite the default,Brendan assures Countywide that he has accepted a new position,which will begin in six months.What are Brendan's options to recover the amount still owed on the mortgage? Which option would most benefit these parties? Why?