Unit 15: Real Estate Financing - Principles

A charge of three discount points on a $120,000 loan equals:

A) $450.

B) $4,500.

C) $3,600.

D) $116,400.

C) $3,600.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. The buyer then signs a note and a mortgage. In this example, the buyer is the:

A) beneficiary.

B) mortgagee.

C) mortgagor.

D) vendor.

C) mortgagor.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. The buyer then signs a note and a mortgage. In this example, the mortgage company is the:

A) mortgagor.

B) beneficiary.

C) vendor.

D) mortgagee.

D) mortgagee.

The borrower under a deed of trust is called the:

A) trustee.

B) trustor.

C) beneficiary.

D) vendee.

B) trustor.

In a land contract, the vendee:

A) is not responsible for the real estate taxes on the property.

B) does not pay interest and principal.

C) obtains legal title at closing.

D) has possession during the term of the contract.

D) has possession during the term of the contract.

A borrower has defaulted on a loan. Which of these BEST describes the rights of the lender in this situation?

A) The acceleration clause in the note gives the lender the right to have all future installments due and payable immediately on default.

B) The escalation clause in the note allows the lender to collect all future interest due on the loan should a buyer default.

C) The defeasance clause in the note stipulates that the lender may begin foreclosure proceedings to collect the remaining mortgage balance.

D) The alienation clause in the note allows the lender to convey the mortgage to a buyer at the foreclosure sale.

A) The acceleration clause in the note gives the lender the right to have all future installments due and payable immediately on default.

After a mortgagor makes final payment to the mortgagee, the mortgagee would give the mortgagor a:

A) release deed.

B) deed of trust.

C) satisfaction of mortgage.

D) mortgage estoppel.

C) satisfaction of mortgage.

Under a typical land contract, when does the vendor give the deed to the vendee?

A) At the closing

B) When the contract is fulfilled and all payments have been made

C) When the contract for deed is approved by the parties

D) After the first year’s real estate taxes are paid

B) When the contract is fulfilled and all payments have been made

If a borrower must pay $2,700 for points on a $90,000 loan, how many points is the lender charging for this loan?

A) 3

B) 2

C) 5

D) 6

A) 3

Pledging property for a loan without giving up possession of the property itself is called:

A) defeasance.

B) alienation.

C) novation.

D) hypothecation.

D) hypothecation.

Although the homeowners have located a buyer for their home, the buyer’s offer is less than what the homeowners owe. In this situation, if the lender agrees to accept an amount less than owed, the lender has agreed to a:

A) short sale.

B) friendly foreclosure.

C) deed in lieu of foreclosure.

D) waiver of redemption.

A) short sale.

Discount points on a mortgage are computed as a percentage of the:

A) selling price.

B) closing costs.

C) down payment.

D) loan amount.

D) loan amount.

In Illinois, mortgage foreclosures may be obtained only through a court proceeding. This means Illinois is characterized as a:

A) judicial foreclosure state.

B) strict foreclosure state.

C) foreclosure-by-lawsuit state.

D) intermediate mortgage theory state.

A) judicial foreclosure state.

In Illinois, when may a mortgagor in default exercise the right of reinstatement?

A) At any time before the foreclosure sale

B) Up to six months after the foreclosure sale

C) Up to 90 days after service of summons

D) Up to 90 days after the payments become delinquent but before summons

C) Up to 90 days after service of summons

In Illinois, when must a release be delivered to a mortgagor or trustor once the mortgage or deed of trust has been fully satisfied?

A) Within 48 hours of full payment and satisfaction

B) Within one month after full payment and satisfaction

C) Within five business days after full payment and satisfaction

D) Within 90 days after full payment and satisfaction

B) Within one month after full payment and satisfaction

The successful bidder at a foreclosure sale in Illinois immediately receives a:

A) sheriff’s deed.

B) certificate of sale.

C) deed of foreclosure.

D) certificate of foreclosure.

B) certificate of sale.

According to the Mortgage Escrow Account Act, an individual who has owned his home for 12 years and reduced his mortgage balance to 65% of its original amount may:

A) receive a 50% rebate from the lender on his escrow account.

B) earn the statutory interest rate on his escrow account deposit.

C) terminate his escrow account.

D) obtain a second loan with only a token down payment.

C) terminate his escrow account.

What is the Illinois usury ceiling for loans secured by real property?

A) 8%

B) None of these

C) 9½%

D) A fluctuating rate based on the quarterly federal reserve rate

B) None of these

Which of these is included in the definition of mortgage contained in the Illinois Mortgage Foreclosure Law?

A) Installment contracts payable over at least five years, with a 20% down payment

B) Installment contracts payable over a maximum of five years

C) Assignments of beneficial interests in living trusts

D) Deeds in trust

A) Installment contracts payable over at least five years, with a 20% down payment

Which of these describes the theory of the mortgagor/mortgagee relationship in Illinois?

A) Title theory

B) Lien theory

C) Conventional theory

D) Intermediate mortgage theory

D) Intermediate mortgage theory