Texas Law of Contracts - Chp. 8 Financing Real Estate

Mortgage

An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; a procedure for foreclosure in event of default is established by statute.

Mortgagor

One who gives a mortgage on his or her property to secure a loan or assure performance of an obligation; a borrower.

Mortgagee

One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation; a lender or creditor

This refers to an instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation...?

Deed

Mortgage

Title

Bill of Sale

Mortgage

One who gives a mortgage on his or her property to secure a loan or assure performance of an obligation is referred to as a...?

Mortgagor

Mortgagee

Grantor

Grantee

Mortgagor (borrower)

One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation is referred to as a...?

Grantor

Grantee

Mortgagor

Mortgagee

Mortgagee (lender)

A mortgage creates which of the following...?

An easement on the property

A cloud on title

A lien on the property

All of the above

A lien on the property

Title Theory State

A state where the mortgage lender has title to the property until the debt is repaid - the borrower has equitable title (Texas is NOT a title theory state)

Lien Theory State

The mortgage merely creates a lien right on the mortgagee with the mortgagor retaining the title. (Texas is this kind)

Modified Lien Theory

Title remains with the mortgagor (borrower) and the mortgagee (lender) can only take it if the borrower defaults on the loan. There is technically no lien on the property

Promissory Note

A borrower's personal promise to pay a debt according to the agreed terms

Usury

On a loan, claiming a rate of interest greater than that permitted by law.

Prepayment Penalty

The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity.

This refers to an interest rate on a loan that is greater than that permitted by law...?

Novation

Inflation

Marker

Usury

Usury

Interest

Which of the following is a charge for the use of money...?

Principal

Interest

Tax

Insurance

Deed of Trust

A legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. It differs from the mortgage in a number of important respects. For example, instead of their being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

Trustor

One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust.

Beneficiary

The lender on the security of a note and deed of trust.

Trustee

One who holds property in trust for another to secure the performance of an obligation. Third party under a trust. (Usually the lender's attorney)

A legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan is referred to as a...?

Title

Survey

Deed of trust

Warranty deed

Deed of trust

One who borrows money from a trust deed lender is referred to as the...?

Beneficiary

Grantor

Trustor

Trustee

Trustor

When a deed of trust is used, the lender is referred to as the...?

Beneficiary

Trustor

Trustee

Grantor

Beneficiary

When a deed of trust is used, who serves as a neutral third party to the borrower and lender...?

Beneficiary

Grantor

Trustor

Trustee

Trustee

Borrower must do several things:

Pay mortgage, pay taxes (highest lien), maintain insurance,

In a Deed of Trust State, the lender can obtain the property through which of the following means...?

Non-judicial foreclosure

Short sale

Judicial foreclosure

Modified foreclosure

Non-judicial foreclosure

In a mortgage State, the lender must go through ......................... in order to obtain the property?

Non-judicial foreclosure

Short sale

Judicial foreclosure

Modified foreclosure

Judicial foreclosure

Acceleration Clause

A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.

Assignment

A transfer by a person of that person's rights under a contract.

Release Clause

A stipulation that upon the payment of a specific sum of money to the holder of a trust deed or mortgage, the lien of the instrument as to a specifically described lot or area shall be removed from the blanket lien on the whole area involved.

Reserves

An accumulation of funds, collected by the lender from the borrower as part of each monthly mortgage payment, an amount allocated to pay property taxes and insurance when they are done.

"Subject To" a Mortgage

When a grantee takes title to real property subject to a mortgage, grantee is not responsible to the holder of the promissory note for the payment of any portion of the amount due.

Assumption of Mortgage

The taking of a title to property by a grantee wherein the grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.

Alienation Clause

A clause in a contract giving the lender certain rights in the event of a sale or other transfer of mortgaged property.

This refers to a condition in a real estate financing instrument giving the lender the power to declare all sums owed the lender immediately due and payable upon the happening of an event...?

Acceleration clause

Alienation clause

Release clause

Assignment clause

Acceleration clause

A transfer by a person of that person's rights under a contract is known as a...?

Alienation

Acceleration

Release

Assignment

Assignment

This refers to a stipulation that upon the payment of a specific sum of money to the holder of a trust deed or mortgage, the lien on the property shall be removed...?

Alienation clause

Acceleration clause

Release clause

Assumption clause

Release clause

This refers to a clause in a contract giving the lender certain rights in the event of a sale or other transfer of mortgaged property...?

Assumption clause

Alienation clause

Release clause

Reserve clause

Alienation clause

Land Contract

A contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid.

Which of the following parties are included in a land contract...?

The seller and beneficiary

The buyer and seller

The buyer and bank

The seller and bank

The buyer and seller

Which of the following will most likely warrant the highest interest rate...?

Seller financing

Conventional mortgage

Unconventional mortgage

FHA loan

Seller financing

Foreclosure

A procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

Judicial Foreclosure

A court proceeding requiring that property be sold to satisfy a mortgage lien.

Deed in Lieu of Foreclosure

A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Redemption

Buying back one's property after a judicial sale.

A non-judicial foreclosure proceeding may occur with which of the following...?

Seller financing

Deed of trust financing

Land contract

All of the above

Seller financing

Deed of trust financing

Land contract

All of the above

Federal Reserve System

The federal banking system of the United States under the control of central board of governors (Federal Reserve System) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.

Primary Mortgage Market

The activity of lenders making mortgage loans to individual borrowers.

Secondary Mortgage Market

The buying and selling of existing deeds of trust and promissory notes.

Fannie Mae

The shortened name for the Federal National Mortgage Association (FNMA), a privately owned corporation that purchases FHA, VA, and conventional mortgages.

Freddie Mac

A nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a corporation wholly owned by the Federal Home Loan Bank System that purchases FHA, VA, and Conventional mortgages.

Ginnie Mae

A nickname for the Government National Mortgage Association (GNMA), a U.S. government agency that purchases FHA and VA mortgages.

Straight Loan

Periodic payments of interest that are only for the life of the loan, with payment of the principle in full at the end of the loan.

Principle

The amount of money borrowed, or the amount of the loan.

Interest

The charge in dollars for the use of money for a period of time.

Balloon Mortgage

A mortgage in which the scheduled payment will not amortize the loan over the mortgage term; therefore, for the debt to be fully satisfied, a final payment called a balloon payment, larger than the uniform payments, is required.

Negative Amortization

Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.

Amortization

The liquidation of a financial obligation on an installment basis.

Fixed-rate Mortgage

A mortgage in which the interest rate does not change.

Adjustable Rate Mortgage (ARM)

A mortgage loan which bears interest at a rate subject to change during the term of the loan, predetermined or otherwise.

Reverse Annuity Mortgage

Used by older people who need additional income and want to take advantage of the equity in their homes.

The federal banking system of the United States is known as the...?

Nation Reserve System

United Reserve System

Federal Reserve System

American Reserve System

Federal Reserve System

How many geographical districts are included in the federal reserve system...?

12

18

21

50

12

The activity of lenders making mortgage loans to individual borrowers is known as the...?

Federal mortgage market

Primary mortgage market

Secondary mortgage market

Government mortgage market

Primary mortgage market

The buying and selling of existing deeds of trust and promissory notes occurs in the...?

Federal mortgage market

Primary mortgage market

Secondary mortgage market

Government mortgage market

Secondary mortgage market

An interest only loan is also known as a/an...?

Adjustable rate loan

Straight loan

Balloon loan

Fixed rate loan

Straight loan

The amount of money borrowed, or the amount of the loan is known as the...?

Balance

Interest

Mortgage

Principle

Principle

This refers to a mortgage in which the scheduled payment will not amortize the loan over the mortgage term; therefore, for the debt to be fully satisfied, a final payment larger than the uniform payments is required...?

Balloon mortgage

Straight mortgage

Adjustable rate mortgage

Fixed term mortgage

Balloon mortgage

Purchase Money Mortgage

A mortgage given by a buyer to a seller to secure payment of all or part of the purchase price.

Conventional Loan

A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type is customarily made by a bank or savings and loan association. Must have great credit for this loan.

Subsidy Buydown

Funds provided usually by the builder or seller to temporarily reduce the borrower's monthly principal and interest payment.

Home Equity Loan

A loan against the equity in a home.

Conforming Loan

Those loans processed on uniform loan forms according to FNMA/FHLMC guidelines.

PITI

An acronym denoting that a mortgage payment includes, principal, interest, taxes, and insurance

Private Mortgage Insurance

Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan (PMI).

FHA-insured Loan

A mortgage loan in which payments are insured by the Federal Housing Administration.

VA Loan

A loan made to qualified veterans for the purchase of real property wherein the Department of Veteran's Affairs guarantees the lender payment of the mortgage.

A mortgage given by a buyer to a seller to secure payment of all or part of the purchase price is known as a...?

Conforming Mortgage

Purchase Money Mortgage

Unconventional Mortgage

Reverse Annuity Mortgage

Purchase Money Mortgage

A mortgage securing a loan made by investors without governmental underwriting is referred to as a/an...?

Conventional loan

Unconventional loan

FHA loan

Home equity loan

Conventional loan

Funds provided usually by the builder or seller to temporarily reduce the borrower's monthly principal and interest payment is known as a...?

Credit

Voucher

Subsidy buydown

Reduction

Subsidy buydown

A loan against the equity in a home is referred to as a...?

Purchase money mortgage

Home equity loan

FHA-insured loan

Unconventional loan

Home equity loan

Loans processed on uniform loan forms according to FNMA/FHLMC guidelines are referred to as...?

Conforming loans

Non-conforming loans

Unconventional loans

Equity loans

Conforming loans

Which of the following is an acronym used to describe the components of a mortgage payment...?

CADDL

PETE

OLD CAR

PITI

PITI

A mortgage loan in which payments are insured by the Federal Housing Administration is known as a...?

Conventional loan

Non-conforming loan

FHA-insured loan

Straight loan

FHA-insured loan

This is a loan made to qualified veterans for the purchase of real property wherein the Department of Veteran's Affairs guarantees the lender payment of the mortgage...?

FHA loan

Conventional loan

Straight loan

VA loan

VA loan

Truth in Lending

The name given to the federal statutes and regulations (Regulation Z) which are designed primarily to insure that prospective borrowers and purchasers on credit receive credit cost information before entering into a transaction.

Real Estate Settlement Procedures Act (RESPA)

A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.

Which of the following refers to a federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by HUD...?

ADA

PITI

TILA

RESPA

RESPA

This Act prohibits discrimination in granting or arraigning credit on the basis of race, color, religion, national origin, sex, marital status, or age...?

ADA

Equal Credit Opportunity Act

TILA

Equal Opportunity Housing Act

Equal Credit Opportunity Act

Which of the following is not considered a violation of the ECOA...?

Refusing to lend to an Asian-American

Refusing to lend to a Catholic

Refusing to lend to a minor

Refusing to lend to a married couple

Refusing to lend to a minor

Non-judicial foreclosure favors which of the following...?

The broker

The borrower

The lender

The Trustee

The lender

The taking of a title to property by a grantee wherein the grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, is known as...?

"Subject-to" a mortgage

Assumption of mortgage

Alienation of a mortgage

Release of a mortgage

Assumption of mortgage

A mortgagor is also referred to as a...?

Lender

Creditor

Borrower

Seller

Borrower

Which of the following operates in the secondary mortgage market...?

Ginnie Mae

All of the above

Freddie Mac

Fannie Mae

All:

Ginnie Mae

Freddie Mac

Fannie Mae

When is an acceleration clause typically executed...?

At the sale of the property

At the assignment of mortgage

When the property is leased

When the property is taxed

At the sale of the property