REE 3043 Final Exam Questions and
All Correct Answers 2026 Updated.
A mortgage loan always creates two documents: a note and a security instrument (the
mortgage or deed of trust). Which of the following items is covered in the security instrument?
a. Late fees
b. Interest rate
c. Amortization term
d. Escrows - Answer d. Escrows
If the lender in a standard first mortgage wished to foreclose when a borrower is in default, it is
crucial to have which clause in the mortgage? (Hint: otherwise they could only collect the
arrearage.)
a. Defeasance clause
b. Exculpatory clause
c. Demand clause
d. Acceleration clause - Answer d. Acceleration cause
Which statement is correct about the right of prepayment in a home mortgage loan?
a. All home mortgage loans have the right of prepayment without charge
b. Home mortgage loans give the right of prepayment without charge only in some states
c. Home mortgage loans
d. Dodd Frank Act severely restricted prepayment penalties so that most home mortgage loans
have the right of prepayment without charge, but not all - Answer d. Dodd Frank Act severely
restricted prepayment penalties so that most home mortgage loans have the right of
prepayment without charge, but not all
A common risk that frequently interferes with a lender's efforts to workout a defaulted loan
through foreclosure or alternatives to foreclosure is:
a. Bankruptcy
, b. Statutory right of redemption
c. Exculpatory clause
d. Equitable right of redemption - Answer a. Bankruptcy
The difference between judicial foreclosure and power of sale in the treatment of defaulted
mortgages can be significant. Which of the following statements regarding power of sale is false:
a. It is less costly for power of sale to be employed than judicial foreclosure
b. The foreclosed property is sold through a public auction following a court order
c. The power of sale treatment is faster than judicial foreclosure
d. Typically, lenders must give proper legal notice to the borrower, advertise the sale property,
and allow a required passage of time before the sale - Answer ?
The element of an adjustable interest rate that is the "moving part" is the:
a. Teaser rate
b. Margin
c. Index
d. Adjustment caps - Answer c. Index
A borrower has a 5/1 ARM tied to the 1-Year London Interbank Offering Rate (LIBOR). The
borrower's current rate (after several adjustments) is 4%. It's the time of year when the rate
adjusts again and the LIBOR is currently at 4%. What will be the borrower's new interest rate if
the loan has the following terms? Introductory interest rate: 3.00%; Margin: 2.25%; Periodic
cap/floor: +/- 2%, and Lifetime cap: + 5%.
C. 6.25%
A. 5.00%
B. 6.00%
D. 8.00% - Answer ?
Find the monthly payment on this fully amortizing loan: $150,000, 30 years, 5 percent annual
interest rate. - Answer $805.23
All Correct Answers 2026 Updated.
A mortgage loan always creates two documents: a note and a security instrument (the
mortgage or deed of trust). Which of the following items is covered in the security instrument?
a. Late fees
b. Interest rate
c. Amortization term
d. Escrows - Answer d. Escrows
If the lender in a standard first mortgage wished to foreclose when a borrower is in default, it is
crucial to have which clause in the mortgage? (Hint: otherwise they could only collect the
arrearage.)
a. Defeasance clause
b. Exculpatory clause
c. Demand clause
d. Acceleration clause - Answer d. Acceleration cause
Which statement is correct about the right of prepayment in a home mortgage loan?
a. All home mortgage loans have the right of prepayment without charge
b. Home mortgage loans give the right of prepayment without charge only in some states
c. Home mortgage loans
d. Dodd Frank Act severely restricted prepayment penalties so that most home mortgage loans
have the right of prepayment without charge, but not all - Answer d. Dodd Frank Act severely
restricted prepayment penalties so that most home mortgage loans have the right of
prepayment without charge, but not all
A common risk that frequently interferes with a lender's efforts to workout a defaulted loan
through foreclosure or alternatives to foreclosure is:
a. Bankruptcy
, b. Statutory right of redemption
c. Exculpatory clause
d. Equitable right of redemption - Answer a. Bankruptcy
The difference between judicial foreclosure and power of sale in the treatment of defaulted
mortgages can be significant. Which of the following statements regarding power of sale is false:
a. It is less costly for power of sale to be employed than judicial foreclosure
b. The foreclosed property is sold through a public auction following a court order
c. The power of sale treatment is faster than judicial foreclosure
d. Typically, lenders must give proper legal notice to the borrower, advertise the sale property,
and allow a required passage of time before the sale - Answer ?
The element of an adjustable interest rate that is the "moving part" is the:
a. Teaser rate
b. Margin
c. Index
d. Adjustment caps - Answer c. Index
A borrower has a 5/1 ARM tied to the 1-Year London Interbank Offering Rate (LIBOR). The
borrower's current rate (after several adjustments) is 4%. It's the time of year when the rate
adjusts again and the LIBOR is currently at 4%. What will be the borrower's new interest rate if
the loan has the following terms? Introductory interest rate: 3.00%; Margin: 2.25%; Periodic
cap/floor: +/- 2%, and Lifetime cap: + 5%.
C. 6.25%
A. 5.00%
B. 6.00%
D. 8.00% - Answer ?
Find the monthly payment on this fully amortizing loan: $150,000, 30 years, 5 percent annual
interest rate. - Answer $805.23
