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Exam 33: Mortgages

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Question 1

True/False

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

A) True
B) False

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Question 2

Multiple Choice

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To purchase a house, Ed obtains a mortgage loan from Farmland Loans Inc. Farmland does not record the mortgage. The most likely consequence is that the lender will

A) not be able to prove its interest in the property.
B) find itself in the position of an unsecured creditor.
C) not have a copy of the loan in a separate location.
D) not obtain reimbursement for any of the loan if the debtor defaults.

E) A) and D)
F) C) and D)

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Question 3

Multiple Choice

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Lenders are required to disclose the terms of a loan in clear, readily understandable language under

To purchase a house, Leo borrows funds from Metro Bank. The terms of the loan give the lender a security interest in the property being acquired by the borrower as security for payment of the debt. This is

To buy a house, Berry applies to Countryside Bank for a fifteen-year mortgage under which the payments remain the same for the duration of the loan. This is

In the context of mortgage loans, an appraiser

The rate of interest paid by the borrower stays fixed with an adjustable-rate mortgage .

To buy a home, Lois pays part of the purchase price up front in cash and borrows the rest of the funds from Members Credit Union. The part of the purchase price paid up front is

Because a mortgage loan involves the transfer of real property, it

A mortgage is a security interest in a debtor's real property.

No state allows a defaulting borrower to repurchase the property after a judicial foreclosure sale.

Once a borrower has received the required Truth-in-Lending Act disclosures, the borrower has no right to cancel the mortgage.

Humberto and Tiara, who are married, borrow $110,000 from Sterling Credit Union to buy a home. The loan is a fixed-rate mortgage at 3.38 percent with a thirty-year term, subject to an acceleration clause, and secured by the home. When Humberto and Tiara have paid off $10,000 of the mortgage-still owing $100,000-they stop making payments. Meanwhile, the home's market value declines to $85,000.  Sterling Credit attempts to contact Humberto and Tiara but cannot get in touch with them and the couple will not return phone calls or e-mails to the bank. 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 steps are involved?

A short sale is a sale of property for less than the balance due on a mortgage loan.

To purchase a house, Dan obtains a mortgage loan from Equity Bank. Dan loses his job. He is likely to find a new job soon but meanwhile defaults on the payments on the loan. The bank agrees to postpone the payments for a limited time. This is

To buy a house, Gina obtains a mortgage loan with Home Mortgage Corporation. Later, Gina defaults on the loan and the property is sold through foreclosure. The final sale price is not enough to cover the loan amount. Most likely, Home Mortgage will

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

To purchase a house, Rita obtains a mortgage loan with Suburban Mortgage Company. Rita defaults on the payments on the loan. The activities take place in a state that allows the lender to foreclose on and sell the property without judicial supervision. This is

Because a mortgage involves a transfer of real property, it need not be in writing.

Bev applies for a mortgage loan at Credit Bank. Shortly after obtaining her mortgage, the bank convinces Bev to refinance. This does not benefit Bev and results in prepayment penalties on the previous mortgage. This is