Calculating Loan Origination Amount:
Loan amount * loan origination fee percent
Loan Origination Fee
Percentage of the loan amount that the Lender charges the buyer to obtain the loan
1/2-2% of loan amount
Hypothecation
Pledge property as collateral to secure a loan without giving up possession
Subordination Agreement
Adjusts priority of loans
Equity
Owners interest in all assets after all liabilities are paid
Title theory
Ownership is transferred to lender, but borrower has equitable title
-Lender has title
Lien Theory
Mortgage creates lien on a property which is help by a third party
-mortgagor (borrower) has legal title
-predominant in CO
-mortgagor puts lien on property held by public trustee via Deed of Trust
Intermediate Theory
Mortgagor retains title but lender can take title by default
Promissory Note
Written contract between borrower and lender
-negotiable
-Promise of one party to pay a sum of money to the other
-Include principal amount, interest rate, & maturity date
-Signed & delivered by borrower
Mortgages (Deed of Trust)
Date, parties names, consideration, words of conveyance, legal description, conditions, Signature of trustor (borrower), reordered, and notarized
Security instrument that borrower give to the lender
Clauses you see in mortgages (Deed of Trust)
-prepayment
-Acceleration
-Defeasance
-Alienation
-Waiver of homestead right
Acceleration Clause
States that upon default, all of the principal installments come due immediately
Prepayment Clause
A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months worth of interest.
Defeasance cause
Once the mortgage is paid off the borrower will receive the title
Alienation (Due-On-Sale Clause)
If you sell the property the mortgage must be paid off upon sale
Waiver of Homestead Right
releases homestead law payment
Homestead Right
-$45,000 homeowner receives
-Must be paid to homeowner before loans are paid off
Installment Land Contract
Property is sold with seller financing
-seller retains legal title and the deed to the property until all of the purchase price is paid
-buyer doesn't receive deed until the property is paid for
-buyer defaults, buyer loses property, seller has cloud on t
Judicial Foreclosure
-Title theory states
-Court order property to be sold
Non-Judicial Foreclosure
-Used in Colorado
-Public trustee has the power to foreclose & advertise in newspapers
-Does not go through courts
-Mortgagee files notice of election with public trustee & evidence of default
-Sale is after 125 days after notice
Strict Foreclose
-Courts give the mortgagee (Lender) title without a sale
Redemption before sale:
Debtor must give 1 week notice to cure, pay all expenses by noon day prior to sale
-Colorado still allows
Redemption after sale:
-30 to 40 days after sale
-Buyer should not touch property until after this period
-Debtor must pay sale price, interest, taxes, other expenses and costs
-after period buyer exchanges certificate of purchase for Sheriff or Treasurers deed
-Colorado no lon
The trustor in connection with a trust deed is the party who:
signs the note
-Borrower under the deed of trust
One purpose of RESPA (Real Estate Settlement Procedures Act) is to:
see that buyers and sellers know all settlement costs
A real estate contract or land contract is described as a method of financing often substituted for mortgage or trust deed financing. Consequently a land contract can be:
A security device
real estate land contract secures the debt for the seller (vendor)
Who is the trustor, trustee, and beneficiary
-trustor is the borrower
-trustee could be a lender, title company, trust company or public official, trustee holds property in trust for another
-Beneficiary is the lender
In Title Theory states the mortgagor (buyer) pledges property to the lender who retains title to secure the loan. In a lien theory state (FYI Colorado), the trustor (borrower) has legal title and a lien is placed on the property to secure the loan.
True
Colorado is a lien theory state. This means:
Deed of Trusts are liens and do not give the lender title to the property
-secures the loan between the the buyer and the lender
-lender does not get title they just get a lien established by a Deed of Trust
-All liens on property must be cleared prior to
At a trustee's sale, a property was sold for $160,800. The fees and court costs amounted to $1,600. The property was encumbered with a first deed of trust in the amount of $156,500 and a second deed of trust in the amount of $2,000. Which of the following
There would be a surplus, which would go to the trustor
total of the liens and foreclosure costs was $160,100. The property sold for $160,800, with a surplus of $700. It belongs to the trustor (borrower)
Regarding trust deeds and mortgages a trust deed may be foreclosed with or without court intervention?
without court intervention
If the sale of a property is secured by a land contract:
vendor has legal title
-vendor (seller) retains title until a portion or all of the debt is satisfied
-vendee (buyer) retains equitable title because as payments build, the vendee is gradually acquiring title
Parties of a trust deed:
-trustee has naked title
-lender is named the beneficiary
-trustor has legal title
An acceleration clause allows the lender to:
make the entire amount due and payable immediately upon buyer's default
The purpose of the alienation clause in a mortgage is to:
prevent the loan from being assumed
lender the option to call the loan (declare the entire balance due) when the property owner transfers ownership, title or interest without the lender's consent.
An example of negative amortization is a loan:
where the payments are insufficient to cover the loan interest
The rescission provisions of truth-in-lending apply to what type of loan?
Home equity
A clause in a mortgage that allows a lender to declare the loan balance due on default of the mortgage payment is:
Acceleration Clause
Which of the following clauses is most likely to be included in a blanket loan?
Release clause
individual property can be release from the blanket loan which covers several properties
A clause which provides for deeds to portions of land to be conveyed as certain percentages of the contract price are paid, is :
partial release clause
used in a blanket mortgage so that individual properties can be released
Which of the following charges increases the lender's yield on a real estate loan:
Origination Fee
Colorado is a lien theory state. In a lien theory state does the trustor (borrower) holds title to the property during the term of the mortgage?
Yes
Which of the following best describes an installment land contract?
A means of selling a property whereby the buyer pays for the property in regular installments while the seller retains title to the property
Usury is:
Collecting more interest than allowed by law
An installment land contract:
A way for the vendor to help the vendee finance the property
Common purpose(s) of a "buydown" of an interest rate would be to:
-help a buyer to afford a more expensive home
-help a buyer qualify for a home more easily
-help the seller make their home more attractive to a prospective buyer
In Colorado the minimum time following recording a Notice of Election and Demand before a residential foreclosure sale can be held is:
110 - 125 days
A mortgage clause which states that, should the borrower sell the property, the entire balance of her mortgage would be due immediately, is known as:
the due-on-sale clause
The clause in a mortgage that can be enforced to make the entire debt due immediately if the mortgagor defaults on the loan is the:
Acceleration Clause
What does the lender receive after a foreclosure sale?
proceeds of the sale up to the amount of the outstanding debt, plus court and collection costs
A release clause in a mortgage:
Allows portions of the property, given as security, to be released from the mortgage lien upon performance of a specified act
You lease a storeroom on a percentage basis. The lease calls for a minimum rental of $300 per month and 5% of the gross annual sales over $80,000. How much is the annual rent with a gross annual business of $150,000?
7100
1) Calculate minimum annual rent - $300 x 12 = $3,600 (annual minimum rent)
2) To calculate rent from percentage of gross sales
a. $150,000 - $80,000 = $70,000 (amount of gross sales to be applied towards percentage rent)
b. $70,000 X .05 (5%) = $3,5
The assessed value is 35% of a property valued at $250,000. The mill rate is 40. What are the monthly taxes on the property?
291.66
$250,000 X .35 = $87,500
$87,500 X .04 = $3500
$3500 / 12 = $291.66 monthly taxes
A sale and leaseback arrangement is one in which a seller sells a property to a buyer and then leases the property back. Which is correct as it applies to a sale and leaseback arrangement?
The seller retains possession of the property
Regulation Z AKA the Truth-In-Lending Act:
Regulates advertising that contains information regarding mortgage terms
A mortgage broker usually offers which of the following services?
Brings borrower and lender togenter
A building was sold for $115,000. Earnest money in the amount of $15,000 was deposited, and the buyer obtained a loan for the balance. The lender charged a fee of 2% of the loan. What was the total cash used by the buyer for this purchase?
$17,000
$115,000 - $15,000
$100,000 * 0.02 = 2,000
$2,000 + $15,000 = $17,000 cash to close
-Lender's fees are not financed as part of the loan, so they need to be brought to the closing table as part of the cash to close
Ms. Nation, an eligible veteran, made an offer of $95,000 to purchase a condo she will finance with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of reasonable value (CRV) for $92,000 was issued for the property. In this cas
the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000
A clause in a deed or trust, mortgage or promissory note which permits the lender to call the outstanding balance due and payable should the property be sold by the borrower is a(n):
Alienation Clause
Under a mortgage, the mortgagor is the party who:
signs the note and gives the mortgage
In order to foreclose a mortgage, a mortgagee would:
File a Court action
Money realized in excess of the indebtedness and the foreclosure belong to:
Mortgagor
A recorded deed of trust is removed from the county records:
when the deed of reconveyance is recorded
The deed of reconveyance must be recorded before a trust deed is released as a lien
A power of sale clause is found in which of the following financing instruments?
Deed of Trust
authorizes a trustee to sell the secured property at public auction in the event of default by the borrower (trustor)
A statement in a mortgage or trust deed to the effect that when a debt has been paid the lien will be canceled is a(n):
defeasance clause
A due on sale clause:
is an alienation provision requiring that the loan be paid off immediately if the property is sold
A preliminary title report, that lists an existing mortgage on the subject parcel of real estate, indicates that there is a(n):
lien against the property because it was pledged as security for the debt
An existing mortgage loan may be changed to a junior lien by:
a subordination agreement
Subordination is the process of allowing another lien to take priority in the event of foreclosure
A three-day right of rescission can be invoked for which contract?
Refinancing your primary residence
When using a deed of trust in a real estate loan, title to the property is held by the:
Trustee
Public Trustee holds "naked title" (title without possession)
The defeasance clause in a mortgage:
Cancels the mortgage when the loan is repaid
A purchaser obtains a fixed rate loan to finance a home. Which of the following characteristics is true of this loan?
The amount of interest to be paid is predetermined
In an installment sales contract when does title usually pass?
upon satisfaction of the installment land contract (loan is paid off)
In Colorado, a property subject to general ad valorem taxes is assessed on the first day of January of the current year, and the lien against the property for the taxes attaches:
On the same date - Jan 1st of the current year
At time of closing, a lender is allowed to collect a loan origination fee that:
has been agreed to by the buyer in the contract
A buyer paid $7,000 in earnest money and acquired a mortgage of 65% of the $48,500 sales price. How much cash did the buyer have to bring to closing?
$9975
$48,500 X .65 = $31,525.00
$48,500 - $31,525.00 = $16,975
$16,975 - $7,000.00 = $9,975.00
A trust deed is held by a private trustee in Colorado, the foreclosure must be:
Judicial
it is a private trustee it must be done through a judicial process, were it held by the public trustee than it could be conducted by the county trustee
The legal procedure in which property that is pledged as security is sold to satisfy the debt is known as
Foreclosure
A court order that authorizes and directs the proper officer of the court to sell the property of a defendant as required by the judgment or decree of the court is known as:
a writ of execution
Davis defaulted on his mortgage and the lender began foreclosure proceedings. At the foreclosure sale Davis's house was sold for $115,000 while the unpaid balance of the loan was $121,000. What can the lender do about the $6,000 difference?
Sue for a deficiency judgment
Discount points are charged by the lender to:
To reduce interest rate
A promissory note calling for payment of interest only during its term is called a(n):
Straight note
This is a promissory note evidencing a loan in which payments of interest only are made periodically during the term of the note. The principal is due in a lump sum upon maturity