REE 3043 Final Exam Review UPDATED
ACTUAL Exam Questions and CORRECT
Answers
In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which
of the following pieces of information is provided in the mortgage? - CORRECT
ANSWER - An unambiguous description of the property that is being pledged as collateral
for the loan.
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of
the loan is tied to an index rate that fluctuates over time. For income-producing property, the
most common index rate is the: - CORRECT ANSWER - London Interbank Offered Rate
(LIBOR)
Added to the index of the adjustable rate is a margin, which is the lender's "markup." For
standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at
approximately: - CORRECT ANSWER - 275 basis points
Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced
interest rate commonly referred to as a: - CORRECT ANSWER - teaser rate
For most mortgage loans on commercial real estate, the right of prepayment is constrained
through a prepayment penalty. Which of the following types of prepayment penalties requires a
borrower to provide the lender with some combination of U.S. Treasury securities that will serve
to replace the cash flows of the loan being paid off? - CORRECT ANSWER - Defeasance
prepayment penalty
Because the mortgage conveys a complex claim for a long period of time, clauses are included in
anticipation of possible future complications. Which of the following clauses requires a borrower
to make monthly deposits into an account in order to pay obligations such as property taxes,
community association fees, or causality insurance premiums? - CORRECT ANSWER -
Escrow clause
, Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to
terminate the loan at sale of the property. Which of the following types of loans is the most likely
to contain a due-on-sale clause? - CORRECT ANSWER - Conventional home loan
Standard mortgage loans require monthly payments typically composed of two components:
interest and principal repayments. When scheduled mortgage payments are insufficient to pay all
of the accumulating interest, causing some interest to be added to the outstanding balance after
each payment shortfall, the loan is said to be: - CORRECT ANSWER - negatively
amortizing
With most standard home loans, the lender can hold the borrower personally liable in the event
of a default. Such loans are commonly referred to as: - CORRECT ANSWER - recourse
loans
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage
property. The lender, i.e. the individual who receives the mortgage claim, is known as the: -
CORRECT ANSWER - mortgagee
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be
viewed as "technical" defaults. In practice, how many days must a payment be overdue in order
for lenders to treat a default as serious (i.e., a substantive default)? - CORRECT
ANSWER - 90 days
When a borrower defaults on the payment requirements of a loan, there are several options that
the lender has at its disposal. When the lender allows the borrower simply to convey the property
to the lender rather than pursuing a court supervised process of terminating all of the borrower's
claims of ownership of the property, this is commonly referred to as: - CORRECT
ANSWER - Deed in lieu of foreclosure
Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring
about sale of the property to recover the outstanding indebtedness. All of the following
statements regarding foreclosure are true EXCEPT: - CORRECT ANSWER - When a
lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear
sale of the property. .
ACTUAL Exam Questions and CORRECT
Answers
In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which
of the following pieces of information is provided in the mortgage? - CORRECT
ANSWER - An unambiguous description of the property that is being pledged as collateral
for the loan.
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of
the loan is tied to an index rate that fluctuates over time. For income-producing property, the
most common index rate is the: - CORRECT ANSWER - London Interbank Offered Rate
(LIBOR)
Added to the index of the adjustable rate is a margin, which is the lender's "markup." For
standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at
approximately: - CORRECT ANSWER - 275 basis points
Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced
interest rate commonly referred to as a: - CORRECT ANSWER - teaser rate
For most mortgage loans on commercial real estate, the right of prepayment is constrained
through a prepayment penalty. Which of the following types of prepayment penalties requires a
borrower to provide the lender with some combination of U.S. Treasury securities that will serve
to replace the cash flows of the loan being paid off? - CORRECT ANSWER - Defeasance
prepayment penalty
Because the mortgage conveys a complex claim for a long period of time, clauses are included in
anticipation of possible future complications. Which of the following clauses requires a borrower
to make monthly deposits into an account in order to pay obligations such as property taxes,
community association fees, or causality insurance premiums? - CORRECT ANSWER -
Escrow clause
, Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to
terminate the loan at sale of the property. Which of the following types of loans is the most likely
to contain a due-on-sale clause? - CORRECT ANSWER - Conventional home loan
Standard mortgage loans require monthly payments typically composed of two components:
interest and principal repayments. When scheduled mortgage payments are insufficient to pay all
of the accumulating interest, causing some interest to be added to the outstanding balance after
each payment shortfall, the loan is said to be: - CORRECT ANSWER - negatively
amortizing
With most standard home loans, the lender can hold the borrower personally liable in the event
of a default. Such loans are commonly referred to as: - CORRECT ANSWER - recourse
loans
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage
property. The lender, i.e. the individual who receives the mortgage claim, is known as the: -
CORRECT ANSWER - mortgagee
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be
viewed as "technical" defaults. In practice, how many days must a payment be overdue in order
for lenders to treat a default as serious (i.e., a substantive default)? - CORRECT
ANSWER - 90 days
When a borrower defaults on the payment requirements of a loan, there are several options that
the lender has at its disposal. When the lender allows the borrower simply to convey the property
to the lender rather than pursuing a court supervised process of terminating all of the borrower's
claims of ownership of the property, this is commonly referred to as: - CORRECT
ANSWER - Deed in lieu of foreclosure
Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring
about sale of the property to recover the outstanding indebtedness. All of the following
statements regarding foreclosure are true EXCEPT: - CORRECT ANSWER - When a
lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear
sale of the property. .
