Question 1

A deficiency judgment requires a borrower to pay the amount of debt remaining after the collateral is sold.

Accepted Answer

A deficiency judgment is a court order that requires a borrower to pay the remaining balance on a loan after the collateral has been sold. This occurs when the sale of the collateral does not generate enough money to cover the outstanding debt.

Question 2

Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home.Payments on the loan remain the same for the duration of the mortgage.This is

Accepted Answer

The description provided matches the features of a fixed-rate mortgage.

Question 3

A borrower has the right to purchase the property after default by paying the full amount of the debt,plus any interest and costs that have accrued.

Accepted Answer

This is known as the right of redemption and is available in some states. It allows the borrower to reclaim the property by paying the full amount owed, including all fees and interest, within a specified time period after default.

Question 4

Federal law encourages private lenders to modify mortgages so as to lower the monthly payments of borrowers who are in default.

Accepted Answer

The Making Home Affordable program, established by the federal government in 2009, provides financial incentives to participating mortgage servicers and lenders to modify loans for eligible borrowers. The goal is to lower monthly payments and help struggling homeowners avoid foreclosure.

Question 5

Under a deed in lieu of foreclosure,the property is conveyed to the lender in satisfaction of the mortgage.

Accepted Answer

In a deed in lieu of foreclosure, the borrower voluntarily transfers the title of their property to the lender in order to satisfy the mortgage debt and avoid foreclosure.

Question 6

Community Trust Bank provides Devlin with a mortgage to buy a home.The rate of interest is fixed for seven years.At the end of that period,a large payment for the entire balance of the mortgage loan is due.This is

Accepted Answer

A mortgage with a large payment due at the end of the loan term is commonly referred to as a balloon mortgage. This type of mortgage typically offers lower monthly payments for a set period of time, followed by a large balloon payment to pay off the remaining balance. It is a legitimate type of loan and is not a violation of the law.

Question 7

When an owner is unable to make mortgage payments,a lender may agree to a short sale.

Accepted Answer

A short sale occurs when a lender allows a property owner to sell their home for less than the amount owed on the mortgage. This can occur when the owner is experiencing financial hardship and is unable to keep up with mortgage payments.

Question 8

There are additional disclosure requirements for a high-cost mortgage loan.

Accepted Answer

The Truth in Lending Act requires additional disclosures for high-cost mortgage loans, including a notice stating that the borrower may not be able to afford the payments based on their current income and expenses, and a list of counseling agencies that can provide assistance. These requirements are intended to protect consumers from entering into loans they cannot afford.

Question 9

If a loan is not paid within a reasonable time after a notice of default,the borrower will receive a notice of sale.

Accepted Answer

After a notice of default, the borrower will typically have a certain amount of time to bring the loan current. If they fail to do so, they will receive a notice of sale, which initiates the foreclosure process.

Question 10

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

Accepted Answer

Forbearance is actually a process where a lender allows a borrower to temporarily pause or reduce their monthly loan payments, typically due to financial hardship. It does not involve repossession or auctioning off the property.

Question 11

Ridgeline Bank provides Stanley with a mortgage to buy a home.The rate of interest is fixed for three years and then adjusts annually.This is

Accepted Answer

The mortgage provided by Ridgeline Bank is an adjustable-rate mortgage as the interest rate is fixed for three years and then adjusts annually.

Question 12

Franz asks Gateway Mortgage Credit for a loan to pay for the purchase of a home.With a poor credit score and a high current debt-to-income ratio,Franz does not qualify for a standard mortgage.Gateway is most likely to provide

Accepted Answer

A subprime mortgage is designed for borrowers with poor credit scores and high debt-to-income ratios who do not qualify for standard mortgages. While they typically come with higher interest rates and fees, they allow individuals like Franz to still be able to purchase a home. A deed in lieu of foreclosure, reverse mortgage, and workout agreement are all different types of loan or payment options that would not be applicable to Franz's situation.

Question 13

A lender can make a higher-priced mortgage loan based on the value of the consumer's home without verifying the consumer's other credit obligations.

Accepted Answer

The answer of A lender can make a higher-priced mortgage...

Question 14

The average prime offer rate is the rate offered to the least qualified borrowers as established by a survey of potential borrowers.

Accepted Answer

The average prime offer rate is actually the average interest rate offered to the most creditworthy borrowers. It is based on a survey of lenders and reflects the rates that they are currently offering to the most qualified borrowers.

Question 15

If a homeowner defaults,the lender has the right to foreclose on the mortgaged property.

Accepted Answer

If a homeowner defaults on their mortgage payments, the lender can foreclose on the property in order to recoup their losses. This is typically outlined in the mortgage agreement that the homeowner signs when obtaining the loan.

Question 16

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

Accepted Answer

The answer of In a judicial foreclosure,the lender is allowed...

Question 17

Consumer Mortgage Loans provides Demi with a mortgage to buy a home.Under the terms,Demi can choose to pay only the interest portion of the monthly payments and forgo paying of the principal for five years.This is

Accepted Answer

This is an interest-only mortgage in which the borrower only pays the interest portion of the monthly payments and delays the payment of the principal for a certain period of time. It is a legal mortgage option that can benefit borrowers who may have cash flow issues in the short term but plan to have the means to pay both interest and principal in the future.

Question 18

Negative amortization occurs when the monthly payments are insufficient to cover the interest due on a loan.

Accepted Answer

Negative amortization occurs when the loan balance increases because the monthly payments are not large enough to cover the interest due. This results in the interest being added to the loan balance, which increases the overall amount owed.

Question 19

A lender can make a higher-priced mortgage loan based on the value of the consumer's home without verifying the consumer's ability to repay the loan.

Accepted Answer

This statement is false. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders must verify a consumer's ability to repay a mortgage loan before making a higher-priced mortgage loan based on the value of the consumer's home. Failure to do so can result in penalties and legal action.

Question 20

Foreclosure is the postponement,for a limited time,of part or all of the payments on a loan in jeopardy of repossession and sale.

Accepted Answer

The answer of Foreclosure is the postponement,for a limited time,of...

Quiz 20: Mortgages Foreclosures After the Recession