Real Estate Finance 30 Final Exam & Answer Key 1) For all practical purposes, an “Alienation Clause” is basically the same as a: a) Call Clause b) Acceleration Clause c) Due on Sale Clause d) Defeasance Clause Answer is “c”: A Due on Sale Clause - This means the loan is not assumable without lender's approval and that the lender can call the loan immediately due and payable in the event the owner sells the property or transfers title to the property. 2) When the lender determines the amount of money to loan to a borrower by using a percentage of the property’s appraisal or sales price, they are trying to determine the: a) Loan-to-Value Ratio b) Interest rate for the loan c) Origination fees d) Borrower’s ability to repay the loan Answer is “a”: Loan-to-Value Ratio - This ratio is figured by taking the amount of the loan and dividing it by the market value of the home. 3) An insurance policy that protects the lender when there is increased risk due to low down payment is known as: a) Junior Mortgage Insurance b) Standard Homeowner’s Insurance c) Term Life Insurance for the borrower d) PMI – Private Mortgage Insurance Answer is “d”: Private Mortgage Insurance - a type of insurance that insures the lender in case the buyer defaults on the loan. The lender requires PMI when the buyer has a down payment less than 20% of the asking price of the home. 4) What are the two most common documents used in real estate financing? a) Mortgage and Subordination Agreement b) Promissory Note and either a Mortgage or a Deed of Trust c) Junior Mortgage and a Reduction Certificate d) Deed of Title and Deed of Trust Answer is “b”: Promissory Note and either a Mortgage or a Deed of Trust - the promissory note and a type of security instrument. The security instrument can be a mortgage or a deed of trust. Both are specific liens used to secure the note until the loan is paid in full. 5) In a title theory state, the mortgage or a deed of trust is still considered a: a) more important than in a Lien Theory state b) the Lender’s statement of the balance remaining on the loan c) transfer of legal title to the lender d) more valuable than any of Donald Trump’s Casino stocks Answer is “c”: transfer of legal title to the lender - This means the lender actually holds legal title to the property until the loan is paid in full. Legal title reverts to the owner/borrower, when the loan is repaid.
Real Estate Finance 30 Final Exam & Answer Key
Jul 05, 2023
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