Real Estate Finance, Sixth Edition Quizzes - firsttuesday

Real Estate Finance, Sixth Edition Quizzes

Instructions: Quizzes are open book. All answers are True or False, or Multiple Choice. Answer key for the online and CD-ROM book is located on Page 493. Answer key for the printed book is located on page 494.

Quiz 1 --Chapters 1-5, Pages 13-54

____ 1. The goals, anticipations and positions of lenders and owners of real estate are: a. diametrically opposed. b. adversarial. c. similar. d. a and b.

____ 2. If the wording of a trust deed so states, options to buy, purchase agreements and sales escrows trigger the due-on clause.

____ 3. A signed promissory note is not the debt itself but evidence of the existence of the debt. ____ 4. A promissory note does not need to be secured by use of a security device such as a trust

deed. ____ 5. Under a(n) _______________, no periodic payments of principal are scheduled; the entire

amount of principal is paid in one lump sum. a. adjustable rate note (ARM) b. all-inclusive trust deed note (AITD) c. installment note d. straight note ____ 6. _______________ call for periodic adjustments to the interest rate, the amount of scheduled payments, and the principal amount (when a negative amortization is involved). a. Graduated payment (GPM) provisions b. Adjustable rate notes (ARMs) c. Fixed-rate notes (FRMs) d. All-inclusive trust deeds (AITDs) ____ 7. Graduated payment (GPM) provisions are in great demand when interest rates or home prices: a. rise quickly. b. decrease quickly. c. decrease slowly. d. stay constant. ____ 8. Real estate loans made or arranged by an institutional lender or real estate broker are not exempt from usury restrictions. ____ 9. To be enforceable, an agreement to pay money on a future date must be definite and certain in its terms. ___ 10. In the case of a nonrecourse, purchase-money loan or a seller carryback note, the buyer is not personally liable for the debt.

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Quiz 2 -- Chapters 6-9, Pages 55-87

____ 1. A promissory note contains a buyer's promise to pay a private lender or carryback seller the: a. principal amount agreed to. b. principal amount agreed to plus any interest. c. interest only. d. none of the above.

____ 2. On a note secured by an owner-occupied, one-to-four unit residential property, a prepayment penalty may be imposed for up to ten years after closing.

____ 3. A penalty on broker-arranged loans for any prepaid principal exceeding ______ of the remaining balance may be imposed for up to seven years after the origination of the loan. a. 5% b. 10% c. 20% d. 25%

____ 4. When a third party signs a note, that third party becomes liable for repayment of the note. ____ 5. A(n) _______________ in a note is used to convert a lender's recourse paper into nonrecourse

paper. a. exculpatory clause b. choice-of-law provision c. equitable assignment d. guarantee agreement ____ 6. A written modification agreement attached to a promissory note is called an: a. allonge. b. execution. c. forbearance. d. mutual agreement. ____ 7. A(n) _______________ occurs when a buyer of real estate is willing to cash out a seller's equity in real estate and assume the existing loan which encumbers the property. a. novation agreement b. cash-to-loan (CTL) transaction c. exculpatory clause d. seller carryback transaction ____ 8. The modification of the interest rate on a carryback note is subject to usury laws. ____ 9. The modification of an existing trust deed note triggers the due-on clause in other trust deeds of record on title to a property. ___ 10. The amount a lender can charge for prepayment of a loan depends on: a. the type of property. b. the owner's use of the property. c. the broker's involvement in negotiations. d. all of the above.

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Quiz 3 -- Chapters 10-14, Pages 88-127

____ 1. When real estate law is applied, a lock-in clause becomes a: a. restraint on alienation. b. prepayment penalty. c. promissory note. d. due-on clause.

____ 2. Lock-in clauses are permitted in limited carryback situations when they are necessary to assure installment sales profit tax treatment.

____ 3. Disguised penalty provisions are enforceable. ____ 4. A complete late charge provision must include:

a. the span of any grace period following the due date before a payment becomes delinquent.

b. the amount of the late charge. c. a requirement for notice from the trust deed holder to impose the late charge and make a

demand for its payment. d. all of the above. ____ 5. If a private lender fails to enforce collection of a late charge for any delinquency by a notice and demand for its payments, the lender waives its right to collect a late charge on that payment. ____ 6. On a loan secured by an owner-occupied, single family residence, only one late charge per delinquent payment may be charged regardless of the number of months the payment is delinquent. ____ 7. The dollar amount of the final/balloon payment on a carryback note must be disclosed: a. in a Seller Carryback Disclosure Statement attached to the purchase agreement. b. in a written due date notice delivered between 90-150 days before the final/balloon pay-

ment is enforced. c. a and b. d. none of the above. ____ 8. A(n) _______________ is any final payment on a note which is an amount greater than twice the amount of any one of the six regularly scheduled payments preceding the date of the final payment. a. call provision b. balloon payment c. due-on clause d. interest payment ____ 9. An owner who places a trust deed lien on his real estate is called a: a. trustor. b. trustee. c. beneficiary. d. creditor. ___ 10. A trust deed gives a beneficiary a security interest in a property, called a: a. mortgage-in-fact. b. lien. c. mutual agreement. d. reconveyance.

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Quiz 4 -- Chapters 15-19, Pages 128-165

____ 1. When an owner intends to reconstruct destroyed improvements and restore his property to its original value, a lender cannot automatically refuse to release hazard insurance proceeds to him.

____ 2. A future advances clause in a trust deed allows a lender to: a. pay the premiums on an insurance policy. b. add the premiums paid to the loan balance and demand immediate reimbursement. c. charge an interest rate of 10% on the advance of a premium for insurance coverage. d. a and b.

____ 3. When provisions in a trust deed which encumbers any type of real estate establishes an impound account for payment of taxes and insurance premiums, a beneficiary must: a. reconvey his interest in the property. b. set the amount of the initial deposit and monthly payments for the impound account. c. pay property taxes and insurance policy premiums from the account. d. b and c.

____ 4. A beneficiary can require an owner of any type of real estate to pay an additional amount to cover a deficiency in an impound account.

____ 5. A financial institution making loans secured by one-to-four unit residential property must pay at least 4% interest annually on an impound account.

____ 6. Following a default, a(n) _______________ in a trust deed transfers the right to collect rental income from the income producing property to a beneficiary. a. impound account b. land sales contract c. assignment of rents provision d. a and b

____ 7. If a lender enforces an assignment of rents provision, it is obligated to pay reasonable property operating costs on the written demand from an owner until: a. a receiver is appointed. b. the lender ceases to enforce its assignment of rents clause. c. a and b. d. none of these.

____ 8. A court-appointed receiver is never considered the owner-operator of a property for which he is charged with the care.

____ 9. Intentional failure to timely send a beneficiary statement results in a _______________ forfeiture by a lender to the person making the request. a. $100 b. $200 c. $300 d. $400

___ 10. A sale-leaseback transaction is not limited by usury laws since it is not considered a loan.

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Quiz 5 -- Chapters 20-24, Pages 166-206

____ 1. An equity purchase investor who violates the five-day cancellation period or takes unconscionable advantage of the seller-in-foreclosure is subject to a fine no greater than $35,000 for each violation.

____ 2. For the EP investor to receive the tax benefits of owning real estate, he must limit the leaseback to a periodic tenancy or a tenancy with a fixed date at which time the tenant is to vacate the premises.

____ 3. In times of _______________, lenders seize any event to trigger the due-on clause in order to increase the interest yield on their portfolio. a. falling interest rates b. rising interest rates c. stable interest rates d. none of the above

____ 4. _______________ occurs when a broker or attorney assists a buyer or seller to mask the change of ownership from a lender with the primary purpose of avoiding the lender's due-on enforcement. a. Tortious interference with prospective economic advantage b. Adviser due-on interference c. A privileged communication d. Interest differential

____ 5. A lender can enforce its due-on clause and call a loan due on its future discovery of any sale of the secured real estate.

____ 6. A seller is liable for a deficiency on the foreclosure of a purchase-money debt taken over under any procedure by a buyer.

____ 7. Recourse loans are classified as purchase-money loans. ____ 8. A lender can enter into an agreement with both a buyer and a seller for the buyer's assumption

of the loan and a release of the seller's liability, called a: a. novation. b. indemnity. c. substitution of liability. . d. a and c. ____ 9. Borrowers under loan programs insured by the Federal Housing Administration (FHA) or Veterans Administration (VA) receive anti-deficiency protection against FHA and VA claims. ___ 10. A security device called a(n) _______________ perfects a lien on personal property against later claims. a. UCC-1 Financing Statement (UCC-1) b. UCC-2 Change Form (UCC-2) c. UCC-3 Request for Information Form (UCC-3) d. all of the above

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