Broker's Exam

  1. When a borrower obtains a real estate loan what do they sign?
    A promissory note and a Trust Deed
  2. What is a promissory note?
    It is a written commitment of a borrower to a loan obligation
  3. What is a security instrument?
    It is a written legal document that secures payment or satisfaction of any debt or obligation
  4. What is a trust deed?
    It is a security instrument that makes the real property collateral for the loan
  5. What are three examples of negotiable instruments?
    • Checks
    • Bank Drafts
    • Promissory Notes
  6. Does a straight note pay on principal?
    No principal payments are made during the term of the loan, but are due payable on a certain date
  7. A holder in due course is a party who has taken a negotiable instrument for value and good faith without what?
    knowledge of any defects
  8. How long does a borrower have for a right of redemption under a judicial foreclosure?
    One year
  9. What is a deficiency judgement?
    It is a personal judgement against a debtor for the difference between the unpaid balance of the secured debt and the amount of the actual proceeds of the sale.
  10. When is a deficiency judgment permitted in CA?
    The property must be foreclosed through a judicial foreclosure and the loan can NOT be a purchase money loan
  11. What party is the trustee in a trust deed loan?
    Third party
  12. The trustee has two jobs, what are they?
    to reconvey or to foreclose
  13. How long must the trustee wait after recording the notice of default?
    90 Days
  14. How long does the trustor have to reinstate the loan before a foreclosure sale?
    5 days
  15. How does the trustee authorize the trustee's sale?
    Through the Power of Sale Clause
  16. How long does the trustor have if the beneficiary elects a judicial foreclosure for equity rights of redemption
    One year
  17. When a trustor signs a deed of trust what has he conveyed?
    And what has he retained?
    He has conveyed the essence of legal title to the trustee but retains equitable title
  18. What is a junior loan?
    It is a 2nd
  19. What is a blanket trust deed?
    It is a loan that secures more than one property as collateral, and contains a release clause that releases specific parcels from the encumbrance upon the repayment of part of the loan.
  20. When a property is transferred, the buyer obtains either a new purchase money loan or what two other loans?
    • Assume the existing loan or
    • take title Subject To the existing property
  21. What is the difference to the seller between a assumed loan or a subject to loan?
    The seller has no liability with an assumed loan but they retain liability with a subject to loan
  22. How are different liens on the same property prioritized?
    By the time of their recording
  23. What clause allows the lender the right to declare the full amount of the debt?
    An acceleration clause
  24. What is another name for a due on sale clause?
    Alienation clause
  25. What is often not enforced in a tight money market?
    The alienation clause isn't enforced when houses are not selling well
  26. How is the basic simple interest formual calculated?
    • i=prt
    • interest= principal/rate/time
  27. What is the nominal interest rate?
    It is the rate stated in the loan document
  28. What is the effective interest rate?
    It is the rate that the borrower is actually paying. It is commonly called the APR (annual percentage rate)
  29. In a conflict between the terms of a note and the deed of trust, which will control?
    Generally the note
  30. PMI is sometimes required by a lender for conventional loans.
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Broker's Exam