Deck 31: A: Mortgages Foreclosures After the Recession

Question 1

If a lender fails to provide certain material disclosures,a borrower has no more than seven days to rescind the mortgage.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

To refinance is to pay off an original mortgage and obtain a new one at more favorable terms.

Answer 3

True

Question 4

Recording a mortgage "perfects" the debtor's security interest in the property.

Question 5

A borrower has the right to purchase the property after default by paying the full amount of the debt,plus any interest and costs that have accrued.

Question 6

A recession is a written instrument that gives a creditor an interest in real property being acquired by a debtor as security for the debt's payment.

Question 7

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

Question 8

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

Question 9

Negative amortization occurs when the monthly payments are insufficient to cover the interest due on a loan.

Question 10

If a loan is not paid within a reasonable time after a notice of default,the borrower will receive a notice of sale.

Question 11

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

Question 12

A lender can make a higher-priced mortgage loan based on the value of the consumer's home without verifying the consumer's ability to repay the loan.

Question 13

Forbearance is a process that allows a lender to legally repossess and auction off the property securing a loan.

Question 14

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

Question 15

The average prime offer rate is the rate offered to the least qualified borrowers as established by a survey of potential borrowers.

Question 16

Under a deed in lieu of foreclosure,the property is conveyed to the lender in satisfaction of the mortgage.

Question 17

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.

Question 18

There are additional disclosure requirements for a loan that carries a high rate of interest or entails high fees for the borrower.

Question 19

Loan flipping occurs when a lender convinces a homeowner to refinance soon after obtaining a mortgage.

Question 20

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

Question 21

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

Question 22

Erin and Dooley,a married couple,borrow $120,000 from Capital & Credit Bank to buy a home.When Erin and Dooley divorce,they are unable to make payments on the mortgage.The market value of the home has declined to less than the balance of the loan.Capital & Credit agrees to a sale of the property for this amount.This is

A)a deed in lieu of foreclosure.
B)a home equity loan.
C)a reverse mortgage.
D)a short sale.

Question 23

Fact Pattern 31-1B
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
Refer to Fact Pattern 31-1B.For Mai's loan,Northeast provides all required disclosures.Mai has a right to rescind the mortgage

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

Question 24

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

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 25

Upton borrows $150,000 from Valley Credit Union to buy a home,which secures the loan.Three years into the term,Upton stops making payments on it.Valley Credit repossesses and auctions off the property to Wesley.The sale proceeds are not enough to cover the unpaid amount of the loan.In most states,Valley Credit can ask a court for

A)a deficiency judgment.
B)a reverse mortgage.
C)a short sale.
D)nothing.

Question 26

Umberto and Tiara,who are married,borrow $110,000 from Sterling Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,subject to an acceleration clause,and secured by the home,which is their principal residence.When Umberto and Tiara have paid off $10,000 of the mortgage-still owing $100,000-they lose their jobs and stop making payments.Sterling Credit makes numerous attempts to contact the couple,but they do not respond.Meanwhile,the market value of their home has declined to $85,000.After six months,Sterling Credit decides to take steps to recover the unpaid amount of the loan.What are the lender's options? Which option seems most likely? Why? What are the steps are involved?

Question 27

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

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."

Question 28

Abner borrows funds from Boomtown Credit Union (BCU)to buy real property.Abner signs a written instrument that gives BCU an interest in the property as security for the debt's payment.This instrument is

A)a mortgage.
B)a Treasury security.
C)a workout agreement.
D)homeowners' insurance.

Question 29

Agnes borrows $110,000 from Bay Harbor Bank to buy a home under a mortgage with an acceleration clause.After eighteen payments,Agnes stops making payments on the mortgage.Bay Harbor

A)can foreclose once on the entire amount of the loan.
B)may seek only the amount of the missed payments,not the entire loan.
C)must foreclose on small amounts over time as each payment comes due.

Question 30

Fact Pattern 31-1B
Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes.
Refer to Fact Pattern 31-1B.Under federal law,disclosures with respect to one of Northeast'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 31

Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home.The financing documents require Laurel to maintain the property,obtain homeowners' insurance,and pay all property taxes and other assessments through the lender.With respect to these terms,a court is most likely to

A)enforce them.
B)refuse to enforce them.
C)rescind them.
D)rewrite them.

Question 32

Donato borrows the funds from Eveready Bank to buy real estate and build a home.Donato's first draw of funds pays for the land.Subsequent draws occur at various stages of construction until the house is ready for occupancy.This is

A)a balloon mortgage.
B)a construction loan.
C)a participation loan. d a reverse mortgage.

Question 33

Hill & Dale Credit Corporation makes mortgage loans to consumers secured by their principal homes.For a Hill & Dale loan to qualify as a Higher-Priced Mortgage Loan (HPML),its annual percentage rate must exceed,by a certain amount,

A)the average prime offer rate for a comparable transaction.
B)the consumer's income-to-debt ratio.
C)the percentage of income that a consumer can devote to its payment.
D)the projected increase in market value of the consumer's home.

Question 34

Shade Tree Lending Corporation advertises loans as fixed-rate loans but,in fact,their rates or payment amounts will change.This is

A)a legal and ethical-but morally arguable-financial ruse.
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 35

Riverview Bank makes a mortgage loan of $95,000 to Pomeroy to buy a home.Under federal law,if Riverview fails to provide certain material disclosures with respect to the loan,Pomeroy's right to rescind the loan

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

Question 36

Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home.The loan is a twenty-year,3/1,adjustable-rate mortgage,with an initial interest rate of 4.0 percent for three years and potential increases of up to 3.0 percent to a cap of 11.0 percent.Before the loan is completed,the lender discloses the amount of the loan principal,the initial interest rate,the initial annual percentage rate,and associated fees and costs.Not disclosed are material details about the amounts of the payments when the interest rate changes.Before the first increase takes effect,Sierra decides that she wants to rescind the loan.What is a "twenty-year,3/1,adjustable-rate mortgage"? Can Sierra rescind this loan? Why or why not?

Question 37

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

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

Question 38

Violet negotiates with Urban Credit Corporation to obtain a loan for $85,000 to buy a home.During the negotiations,Urban Credit orally misrepresents the terms,but provides the required documents,which accurately state the terms.Violet does not read the documents.The party or parties most likely liable for a violation of the law is

A)neither party.
B)Urban Credit.
C)Urban Credit and Violet.
D)Violet.

Question 39

Virgil borrows $175,000 from United Finance Bank to buy a home.Federal law regulates primarily

A)mortgage terms that must be disclosed in writing.
B)oral representations with respect to the terms of a loan.
C)the lowest prices for which real property can be sold.
D)who can buy real property,where they can buy it,and why.

Question 40

Franz asks Gateway Mortgage Credit for a loan to pay for the purchase of a home.With a poor credit score and a high current debt-to-income ratio,Franz does not qualify for a standard mortgage.Gateway is most likely to provide

A)a deed in lieu of foreclosure.
B)a reverse mortgage.
C)a subprime mortgage.
D)a workout agreement.