Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus

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1 Finance 382 Real Estate Principles and Practice Instructor: Jan E. Beran Student s Name Version A FILL IN YOUR NAME (Lastname, Firstname) WHERE INDICATED, BE SURE TO FILL IN THE CORRESPONDING BUBBLES. Do not put your SSN on your bubble sheet. Mark the version of your test (A) on your bubble sheet in column K, (Fill in Bubbles 1=A, 2=B, 3=C and 4=D). Sheets without a name or without a version code will not be graded, and a ZERO will be recorded as your score. When completed, put your bubble sheet in the corresponding pile. I will not re-sort or hand grade the exam sheets. There are four section tests plus a comprehensive final. You have 50 minutes to complete the exam. Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus Multiple Choice Identify the choice that best completes the statement or answers the question. 1. In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer a. gifts such as appliances, trips, etc. c. lower insurance rates. b. lower initial interest rates. d. lower down payments. 2. A mortgage instrument may include a clause that prevents the assumption of the mortgage by a new purchaser without the lender s consent. What is this clause called? a. Defeasance clause c. Certificate of sale clause b. Alienation clause d. Power of Sale clause 3. A loan payment that combines interest, principal, insurance and taxes: a. TTIP c. PETE b. PITI d. PI 4. The type of loan whereby the borrower makes interest only payments during the life of the loan with the entire principal due for the final payment is called a. an amortized loan. c. a term loan. b. a partially amortized loan. d. a discounted loan. 5. The type of loan in which the final payment is larger than the preceding payments: a. balloon loan c. term loan b. wrap around loan d. amortized loan 6. When a property is financed by means of a deed of trust, by whom are the payments made? a. Grantee c. Beneficiary b. Trustee d. Trustor 7. Which of the following describes a mortgage that requires principal and interest payments at regular intervals until the debt is satisfied? a. Term mortgage c. Balloon mortgage b. Amortized mortgage d. First mortgage 8. An asset that may readily be convertible to cash in a few days. a. equity c. liquid asset b. illiquid asset d. contingent liability 9. A clause that states that a mortgage is defeated if the borrower repays the accompanying note on time: a. power of sale clause c. alienation clause b. acceleration clause d. defeasance clause 1

2 Version: A 10. PITI with regard to financing means: a. The four unities of a real estate loan are possession, interest, time, and investment b. A loan requiring periodic payments of principal and interest only c. A loan requiring periodic payment of principal, interest, taxes and insurance d. Sorrow or regret 11. When making a mortgage loan application, borrowers are protected from discrimination based on marital status by the a. Real Estate Settlement Procedures Act. b. Equal Credit Opportunity Act. c. Fair Credit Reporting Act. d. Fair Housing laws. 12. The secondary mortgage market is successful because there are a large number of investors willing to invest in: a. Low risk notes c. Stocks b. Commodities d. Bonds 13. The APR is all of the following except: a. usually lower than the interest rate. b. made up of the interest rate combined with the other costs of the loan. c. usually higher than the interest rate. d. a required disclosure of the Truth in Lending Act. 14. One of the several differences between a mortgage and a deed of trust is: a. When fully paid, a mortgage must be released, a Trustee of a Deed of Trust must reconvey the property to borrower b. There is no difference only the title of the document c. When fully paid, a Deed of Trust must be released, a mortgage deeded back d. Following a default, a mortgage may be cured by catching payments up, a deed of trust must be paid in full 15. To give assurance that upon satisfaction of the contract a deed will be delivered, the following document should be placed in escrow : a. Warranty Deed c. Mortgage b. Land Contract d. Promissory Note 16. What is the clause in a note, mortgage, or trust deed (deed of trust) that permits a lender to declare the entire unpaid sum due should the borrower default? a. acceleration clause c. forfeiture clause b. judgment clause d. escalator clause 17. Industries which produce goods and services for export are referred to by all of the following terms EXCEPT a. base industries. c. primary industries. b. backbone industries. d. export industries. 18. A discharge of a mortgage upon payment of the debt owed is known as: a. Assumption of Mortgage c. Satisfaction of Mortgage b. Subordination d. Redemption 19. As payments are made, the amount of interest taken from a mortgage loan payment decreases and the amount applied to the principal increases. This is because of a. amortization. c. appreciation. b. variable interest rate. d. depreciation. 2 of 5

3 Version: A 20. A method of selling and financing property whereby the seller retains title but the buyer takes possession while making payments: a. Installment contract c. Tax deferred exchange b. Deed of Trust d. Warranty Deed 21. Any mortgage lower in priority than the first mortgage a. first mortgage c. deed of trust b. chattel mortgage d. junior mortgage 22. Upon payment of the debt secured by a deed of trust, the a. trustor issues a deed for reconveyance. b. grant deed is issued to the trustee. c. trustor now has equitable title. d. trustee issues a release deed for reconveyance. 23. A primary mortgage lender is one who a. originates loans and makes funds available to borrowers. b. pools, insures, guarantees and sells first mortgage loans. c. lends to FNMA, FHLMC and GNMA. d. lends only for first mortgages and deeds of trust. 24. Under a conditional land sales contract, a. equitable title is held by a trustee. c. equitable title is held by the vendee. b. legal title is held by the vendee. d. legal title is held by a trustee. 25. When there is a sudden increase in the demand for housing in a community, the price of existing housing will a. not reflect the increased demand for approximately 12 months. b. rise rapidly, then fall slightly as supply catches up with demand. c. rise slowly over the next 12 months. d. none of the above. 26. Truth in lending laws were created primarily to protect a. consumers. c. lenders. b. mortgagees. d. beneficiaries. 27. Who is the trustor in a deed of trust? a. Vendor c. Borrower b. Lender d. Grantor 28. Which of the following ratios of monthly payment to monthly income would be preferred by a residential lender? a. 25% c. 65% b. 75% d. 55% 29. To provide constructive notice of an interest in the real estate a mortgagee should require that the following document be recorded with the register of deeds: a. Mortgage c. Promissory note b. Deed of trust d. Land Contract 30. The care and upkeep of a loan once it is made describes: a. loan originating c. loan servicing b. mortgage insuring d. mortgage brokering 3 of 5

4 Version: A 31. Which mortgage is secured by more than one parcel of real property? a. Wraparound mortgage c. Blanket mortgage b. Package mortgage d. Purchase-money mortgage 32. A new home developer who is including appliances with the sale of each house most probably would assist the buyer in obtaining a a. equity sharing mortgage. c. package mortgage. b. shared appreciation mortgage. d. blanket mortgage. 33. Which of the following would be most important to a lender qualifying an individual for a residential mortgage loan? a. Overtime income c. Spouse s part-time income b. Borrower s regular income d. Pest and dry rot report 34. The end of the life of a loan is known as: a. termination date c. alienation date b. maturity date d. acceleration date 35. A deed given as security for the loan against real estate is known as a. a trust deed. c. hypothecated. b. usury. d. illegal consideration. 36. The difference between a property s market value and the debts against it is known as: a. Fair Market Value c. Loan to value ratio b. Owner s equity d. Assessment 37. What is the MAJOR DIFFERENCE between a deed of trust and a mortgage? a. both involve the buyer s signing a note b. a deed of trust transfers a title interest while a mortgage gives the lender a lien on the property c. both can be judicially foreclosed on d. both are security instruments for a debt 38. The phrase taking back paper applies to a. seller financing. c. conventional loans. b. VA loans. d. a cash sale. 39. A deed of trust loan must include a power of sale clause to be foreclosed by a. judicial procedure c. advertisement b. the FHA d. action 40. A market in which mortgage loans can be sold to investors: a. primary market c. farmer s market b. stock market d. secondary market 41. A document that makes a specific property security for the repayment of a debt. a. Mortgage c. Assumption agreement b. Promissory Note d. Quitclaim Deed 42. To provide constructive notice of an interest in the real estate a Vendee should require that the following document be recorded with the Register of Deeds: a. Land Contract c. Promissory Note b. Deed of Trust d. Mortgage 4 of 5

5 Version: A 43. All of the following may be used for setting ARM interest rates EXCEPT a. six-month Treasury bills. c. one-year U.S. Treasury securities. b. cost of funds to thrift institutions. d. Gross National Product 44. The right, which allows the mortgagor to regain his property following a mortgage foreclosure, is known as a. satisfaction of mortgage. c. due on sale. b. right of redemption. d. defeasance. 45. A due on sale clause a. is the right of a mortgagor to repay a loan. b. may be called a subordination clause. c. gives the lender the right to call the entire loan balance upon alienation. d. gives the mortgagor the right to sell his property with a loan assumption by the buyer. 46. A Deed of Trust would be signed by the a. trustor. c. beneficiary. b. trustee. d. grantee. 47. The instrument which conveys naked title to a trustee is the a. trust deed. c. reconveyance deed. b. notice of default. d. guardian s deed. 48. When advertising, a lender must disclose the a. cost of appraisal. b. cost of the title search and title insurance. c. closing costs. d. annual percentage rate. 49. All of the following contribute to home sales EXCEPT: a. Job growth c. Rising home prices b. Tight money supply d. Low interest rates 50. Who must sign the deed of reconveyance of a deed of trust? a. Trustee c. Beneficiary b. Trustor d. Grantee 5 of 5

6 ID: A Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus Answer Section MULTIPLE CHOICE 1. B 2. B 3. B 4. C 5. A 6. D 7. B 8. C 9. D 10. C 11. B 12. A 13. A 14. A 15. A 16. A 17. B 18. C 19. A 20. A 21. D 22. D 23. A 24. C 25. B 26. A 27. C 28. A 29. A 30. C 31. C 32. C 33. B 34. B 35. A 36. B 37. B 38. A 39. C 40. D 41. A 42. A 1 of 2

7 ID: A 43. D 44. B 45. C 46. A 47. A 48. D 49. B 50. A 2 of 2

8 Finance 382 Real Estate Principles and Practice Instructor: Jan E. Beran Student s Name Version B FILL IN YOUR NAME (Lastname, Firstname) WHERE INDICATED, BE SURE TO FILL IN THE CORRESPONDING BUBBLES. Do not put your SSN on your bubble sheet. Mark the version of your test (B) on your bubble sheet in column K, (Fill in Bubbles 1=A, 2=B, 3=C and 4=D). Sheets without a name or without a version code will not be graded, and a ZERO will be recorded as your score. When completed, put your bubble sheet in the corresponding pile. I will not re-sort or hand grade the exam sheets. There are four section tests plus a comprehensive final. You have 50 minutes to complete the exam. Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus Multiple Choice Identify the choice that best completes the statement or answers the question. 1. As payments are made, the amount of interest taken from a mortgage loan payment decreases and the amount applied to the principal increases. This is because of a. amortization. c. appreciation. b. variable interest rate. d. depreciation. 2. What is the clause in a note, mortgage, or trust deed (deed of trust) that permits a lender to declare the entire unpaid sum due should the borrower default? a. acceleration clause c. forfeiture clause b. judgment clause d. escalator clause 3. The right, which allows the mortgagor to regain his property following a mortgage foreclosure, is known as a. satisfaction of mortgage. c. due on sale. b. right of redemption. d. defeasance. 4. The care and upkeep of a loan once it is made describes: a. loan originating c. loan servicing b. mortgage insuring d. mortgage brokering 5. All of the following may be used for setting ARM interest rates EXCEPT a. six-month Treasury bills. c. one-year U.S. Treasury securities. b. cost of funds to thrift institutions. d. Gross National Product 6. When making a mortgage loan application, borrowers are protected from discrimination based on marital status by the a. Real Estate Settlement Procedures Act. b. Equal Credit Opportunity Act. c. Fair Credit Reporting Act. d. Fair Housing laws. 7. The APR is all of the following except: a. usually lower than the interest rate. b. made up of the interest rate combined with the other costs of the loan. c. usually higher than the interest rate. d. a required disclosure of the Truth in Lending Act. 8. A method of selling and financing property whereby the seller retains title but the buyer takes possession while making payments: a. Installment contract c. Tax deferred exchange b. Deed of Trust d. Warranty Deed 1

9 Version: B 9. Who is the trustor in a deed of trust? a. Vendor c. Borrower b. Lender d. Grantor 10. An asset that may readily be convertible to cash in a few days. a. equity c. liquid asset b. illiquid asset d. contingent liability 11. Upon payment of the debt secured by a deed of trust, the a. trustor issues a deed for reconveyance. b. grant deed is issued to the trustee. c. trustor now has equitable title. d. trustee issues a release deed for reconveyance. 12. To provide constructive notice of an interest in the real estate a mortgagee should require that the following document be recorded with the register of deeds: a. Mortgage c. Promissory note b. Deed of trust d. Land Contract 13. One of the several differences between a mortgage and a deed of trust is: a. When fully paid, a mortgage must be released, a Trustee of a Deed of Trust must reconvey the property to borrower b. There is no difference only the title of the document c. When fully paid, a Deed of Trust must be released, a mortgage deeded back d. Following a default, a mortgage may be cured by catching payments up, a deed of trust must be paid in full 14. Under a conditional land sales contract, a. equitable title is held by a trustee. c. equitable title is held by the vendee. b. legal title is held by the vendee. d. legal title is held by a trustee. 15. The secondary mortgage market is successful because there are a large number of investors willing to invest in: a. Low risk notes c. Stocks b. Commodities d. Bonds 16. The difference between a property s market value and the debts against it is known as: a. Fair Market Value c. Loan to value ratio b. Owner s equity d. Assessment 17. When there is a sudden increase in the demand for housing in a community, the price of existing housing will a. not reflect the increased demand for approximately 12 months. b. rise rapidly, then fall slightly as supply catches up with demand. c. rise slowly over the next 12 months. d. none of the above. 18. Truth in lending laws were created primarily to protect a. consumers. c. lenders. b. mortgagees. d. beneficiaries. 2 of 5

10 Version: B 19. A primary mortgage lender is one who a. originates loans and makes funds available to borrowers. b. pools, insures, guarantees and sells first mortgage loans. c. lends to FNMA, FHLMC and GNMA. d. lends only for first mortgages and deeds of trust. 20. To provide constructive notice of an interest in the real estate a Vendee should require that the following document be recorded with the Register of Deeds: a. Land Contract c. Promissory Note b. Deed of Trust d. Mortgage 21. Industries which produce goods and services for export are referred to by all of the following terms EXCEPT a. base industries. c. primary industries. b. backbone industries. d. export industries. 22. Any mortgage lower in priority than the first mortgage a. first mortgage c. deed of trust b. chattel mortgage d. junior mortgage 23. The phrase taking back paper applies to a. seller financing. c. conventional loans. b. VA loans. d. a cash sale. 24. A clause that states that a mortgage is defeated if the borrower repays the accompanying note on time: a. power of sale clause c. alienation clause b. acceleration clause d. defeasance clause 25. A mortgage instrument may include a clause that prevents the assumption of the mortgage by a new purchaser without the lender s consent. What is this clause called? a. Defeasance clause c. Certificate of sale clause b. Alienation clause d. Power of Sale clause 26. When advertising, a lender must disclose the a. cost of appraisal. b. cost of the title search and title insurance. c. closing costs. d. annual percentage rate. 27. PITI with regard to financing means: a. The four unities of a real estate loan are possession, interest, time, and investment b. A loan requiring periodic payments of principal and interest only c. A loan requiring periodic payment of principal, interest, taxes and insurance d. Sorrow or regret 28. A loan payment that combines interest, principal, insurance and taxes: a. TTIP c. PETE b. PITI d. PI 29. To give assurance that upon satisfaction of the contract a deed will be delivered, the following document should be placed in escrow : a. Warranty Deed c. Mortgage b. Land Contract d. Promissory Note 3 of 5

11 Version: B 30. Which of the following would be most important to a lender qualifying an individual for a residential mortgage loan? a. Overtime income c. Spouse s part-time income b. Borrower s regular income d. Pest and dry rot report 31. Which mortgage is secured by more than one parcel of real property? a. Wraparound mortgage c. Blanket mortgage b. Package mortgage d. Purchase-money mortgage 32. The type of loan whereby the borrower makes interest only payments during the life of the loan with the entire principal due for the final payment is called a. an amortized loan. c. a term loan. b. a partially amortized loan. d. a discounted loan. 33. A deed given as security for the loan against real estate is known as a. a trust deed. c. hypothecated. b. usury. d. illegal consideration. 34. All of the following contribute to home sales EXCEPT: a. Job growth c. Rising home prices b. Tight money supply d. Low interest rates 35. A market in which mortgage loans can be sold to investors: a. primary market c. farmer s market b. stock market d. secondary market 36. A discharge of a mortgage upon payment of the debt owed is known as: a. Assumption of Mortgage c. Satisfaction of Mortgage b. Subordination d. Redemption 37. A document that makes a specific property security for the repayment of a debt. a. Mortgage c. Assumption agreement b. Promissory Note d. Quitclaim Deed 38. The type of loan in which the final payment is larger than the preceding payments: a. balloon loan c. term loan b. wrap around loan d. amortized loan 39. A new home developer who is including appliances with the sale of each house most probably would assist the buyer in obtaining a a. equity sharing mortgage. c. package mortgage. b. shared appreciation mortgage. d. blanket mortgage. 40. A due on sale clause a. is the right of a mortgagor to repay a loan. b. may be called a subordination clause. c. gives the lender the right to call the entire loan balance upon alienation. d. gives the mortgagor the right to sell his property with a loan assumption by the buyer. 41. A deed of trust loan must include a power of sale clause to be foreclosed by a. judicial procedure c. advertisement b. the FHA d. action 4 of 5

12 Version: B 42. Which of the following describes a mortgage that requires principal and interest payments at regular intervals until the debt is satisfied? a. Term mortgage c. Balloon mortgage b. Amortized mortgage d. First mortgage 43. Who must sign the deed of reconveyance of a deed of trust? a. Trustee c. Beneficiary b. Trustor d. Grantee 44. In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer a. gifts such as appliances, trips, etc. c. lower insurance rates. b. lower initial interest rates. d. lower down payments. 45. A Deed of Trust would be signed by the a. trustor. c. beneficiary. b. trustee. d. grantee. 46. The instrument which conveys naked title to a trustee is the a. trust deed. c. reconveyance deed. b. notice of default. d. guardian s deed. 47. When a property is financed by means of a deed of trust, by whom are the payments made? a. Grantee c. Beneficiary b. Trustee d. Trustor 48. What is the MAJOR DIFFERENCE between a deed of trust and a mortgage? a. both involve the buyer s signing a note b. a deed of trust transfers a title interest while a mortgage gives the lender a lien on the property c. both can be judicially foreclosed on d. both are security instruments for a debt 49. The end of the life of a loan is known as: a. termination date c. alienation date b. maturity date d. acceleration date 50. Which of the following ratios of monthly payment to monthly income would be preferred by a residential lender? a. 25% c. 65% b. 75% d. 55% 5 of 5

13 ID: B Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus Answer Section MULTIPLE CHOICE 1. A 2. A 3. B 4. C 5. D 6. B 7. A 8. A 9. C 10. C 11. D 12. A 13. A 14. C 15. A 16. B 17. B 18. A 19. A 20. A 21. B 22. D 23. A 24. D 25. B 26. D 27. C 28. B 29. A 30. B 31. C 32. C 33. A 34. B 35. D 36. C 37. A 38. A 39. C 40. C 41. C 42. B 1 of 2

14 ID: B 43. A 44. B 45. A 46. A 47. D 48. B 49. B 50. A 2 of 2

15 Test 3 Spring 2015: Chapters 8 (Land Contract) through 14 and 26 Jacobus [Version Map] A B MC 1 44 MC 2 25 MC 3 28 MC 4 32 MC 5 38 MC 6 47 MC 7 42 MC 8 10 MC 9 24 MC MC 11 6 MC MC 13 7 MC MC MC 16 2 MC MC MC 19 1 MC 20 8 MC MC MC MC MC MC MC 27 9 MC MC MC 30 4 MC MC MC MC MC MC MC MC MC MC MC MC MC 43 5 MC 44 3 MC MC MC MC MC MC

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