Question 1

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, where the borrower has the option to pay only the interest portion of the monthly payments and defer the principal payments for five years.

Question 2

Great Plains Bank provides a loan to enable Helene to buy real property.This loan is

Accepted Answer

Great Plains Bank provides a mortgage loan to enable Helene to buy real property. A mortgage is a type of loan that is taken out to purchase real estate, with the property acting as collateral for the loan.

Question 3

Kenton borrows $150,000 from Liberty Home Finance Corporation to buy a home.Federal law concerns primarily

Accepted Answer

Federal law primarily concerns the disclosure requirements with respect to a mortgage. The Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) are two federal laws that require lenders to disclose certain information to borrowers, including the terms of the loan, the interest rate, and any fees associated with the loan. This is designed to protect borrowers from being taken advantage of by lenders who may not fully disclose the terms of the loan.

Question 4

Fact Pattern 31-1A (Questions A12-A14 apply)
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 31-1A.24-Hour Credit assigns Benny's loan to Consolidated Mortgage Investment Corporation.For most purposes,Consolidated

Accepted Answer

When a loan is assigned or transferred, the assignee or transferee generally takes the loan subject to any claims or defenses that the borrower (Benny) could have asserted against the original lender (24-Hour Credit). Therefore, Consolidated Mortgage Investment Corporation, as the assignee of Benny's loan, is subject to any claims that Benny could have asserted against 24-Hour Credit. There is no indication in the fact pattern that Consolidated Mortgage Investment Corporation would qualify as a holder in due course, and being an assignee of a mortgage does not automatically exempt a party from federal law.

Question 5

Jaime buys a home by paying part of the purchase price up front in cash and borrowing the rest of the funds from Valley Credit Union.The part of the price paid up front in cash is

Accepted Answer

The part of the purchase price paid up front in cash is called the down payment.

Question 6

Fact Pattern 31-1A (Questions A12-A14 apply)
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 31-1A.Under federal law,if 24-Hour Credit fails to provide certain material disclosures with respect to the loan,Benny's right to rescind the loan

Accepted Answer

Under the Truth in Lending Act (TILA), if a lender fails to provide certain material disclosures with respect to the loan, the borrower's right to rescind the loan is extended for up to three years. This means that Benny would have three years from the date of the loan to rescind it if 24-Hour Credit fails to provide material disclosures.

Question 7

Fact Pattern 31-1A (Questions A12-A14 apply)
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,including Benny,who could not easily obtain credit under other loan programs.
-Refer to Fact Pattern 31-1A.Under federal law,disclosures with respect to one of 24-Hour Credit's loans must be provided

Accepted Answer

Under federal law, disclosures with respect to high-cost and high-fee mortgage loans must be provided a certain number of days before the loan is finalized.

Question 8

Lorna borrows $175,000 from Mountainside Credit Union to buy a home.Among the terms that must be disclosed under federal law is the annual percentage rate.This is

Accepted Answer

The annual percentage rate (APR) is the actual cost of the loan on a yearly basis, which includes not only the interest rate but also any fees or charges associated with the loan. It is required to be disclosed under federal law to help borrowers compare loans and understand the total cost of borrowing.

Question 9

Seymour borrows $350,000 from Reliable Bank to buy a home.Seymour stops making payments on the loan ten months later.After the bank repossesses the property securing the loan but before it is sold,Seymour wants to buy it.This is

Accepted Answer

This is the right of redemption, which allows the borrower to reclaim their property before it is sold after defaulting on the loan. It typically involves paying the outstanding balance, interest, and any additional fees associated with the repossession.

Question 10

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 to Stanley is an adjustable-rate mortgage as the rate of interest adjusts annually after being fixed for three years.

Question 11

Ruth owns a home on which she has two mortgages provided by Security Bank.Town Refinance Inc.tells Ruth that it can refinance the loans to reduce her payments.Town Refinance provides all of the required documents,which accurately state the payments under the new loan as higher.Ruth does not read the documents.Town Refinance is most likely liable for

Accepted Answer

Town Refinance provided all required documents accurately stating the terms, and Ruth's failure to read them does not make Town Refinance liable.

Question 12

Milo borrows $125,000 from North State Bank to buy a home.To comply with the Statute of Frauds,the mortgage must be

Accepted Answer

The Statute of Frauds requires certain contracts, including mortgages, to be in writing to be enforceable. Therefore, Milo's mortgage must be in writing, making option D the best choice. The other options do not necessarily apply, as the formalness of the document, the particular form, or the lender's format are not requirements of the Statute of Frauds.

Question 13

Velma borrows $110,000 from Watershed Bank to buy a home.If she fails to make payments on the mortgage,the bank has the right to repossess and auction off the property securing the loan.This is

Accepted Answer

This scenario describes the possibility of foreclosure, which is the legal process by which a lender reclaims a property securing a loan when a borrower fails to make payments on the mortgage. The lender can then auction off the property to recoup their losses.

Question 14

Hubert borrows $100,000 from Integrity Mortgage Mart to buy a home.Soon after obtaining the mortgage,Integrity convinces Hubert to refinance.This is

Accepted Answer

Refinancing a mortgage soon after obtaining it, especially multiple times, is known as loan flipping. It is often done by predatory lenders to generate additional fees and interest, and is generally not in the best interest of the borrower.

Question 15

Main Street Lenders,Inc.,attempts to coerce Nolan-who specializes in determining the value of real and personal property-into misstating the value of a property on which a loan is to be issued.This is

Accepted Answer

Coercing someone to misstate the value of a property is a clear violation of the law, specifically related to fraud or misrepresentation. It is important to maintain ethical and legal standards in the lending industry to protect all parties involved.

Question 16

Darwin borrows $200,000 from Evermore Bank to buy a home.Less than six months into the term,Darwin stops making payments on the loan.To initiate the process to repossess and auction off the property securing the loan,Evermore must

Accepted Answer

Evermore must record a notice of default with the appropriate county office to initiate the process of repossessing and auctioning off the property securing the loan. This is a legal step taken by the lender to let the borrower know that they are in default on their loan and that the lender is taking steps to foreclose on the property. Once the notice of default is recorded, the borrower has a certain amount of time to bring their payments up to date or face foreclosure proceedings.

Question 17

Reed borrows $150,000 from Suburban Credit Union to buy a home,which secures the loan.Three years later,Reed stops making payments on the loan.After Suburban Credit repossesses and auctions off the property to Tyler,equity remains.This amount most likely belongs to

Accepted Answer

When a property is repossessed and sold, any remaining equity after paying off the loan and associated costs typically belongs to the original borrower, in this case, Reed.

Question 18

Property Financial Corporation makes loans that qualify,under a Federal Reserve Board amendment to Regulation Z,as Higher-Priced Mortgage Loans (HPMLs).Quinn applies to Property Financial for an HPML.To make the loan,the lender must

Accepted Answer

As an HPML lender, Property Financial Corporation must verify the borrower's ability to repay the loan, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. This ensures that the borrower is not put at risk of defaulting on the loan, which would not only hurt the borrower but also the lender and the overall economy. The other three choices do not align with responsible lending practices and are not required or allowed under HPML protections.

Question 19

Rita borrows $30,000 from South State Credit Union.South State accepts Rita's equity in her home as collateral,which can be seized if the loan is not repaid on time.This is

Accepted Answer

This is a home equity loan, as the borrower is using their equity in their home as collateral for the loan.

Question 20

Harbor Bay Bank has made mortgage loans to consumers that qualify for the Home Affordable Modification Program (HAMP),which offers incentives to lenders to change the terms of certain loans.The purpose of HAMP is to

Accepted Answer

The purpose of HAMP is to reduce the monthly payments of homeowners to levels that they can afford. It does not involve conveying property to consumers who can afford it or transferring affordable property to investors to lease to consumers. It also does not force lenders to forgive all high-risk mortgages.

Quiz 31: Mortgages Foreclosures After the Recession