Skill Test 03 - 20

Buyer Petroff is purchasing a property and is interested in exploring private financing as an alternate source of mortgage funds. Which of the following statements is (are) correct as it relates to private financing sources? l. Private investment groups, while not regulated, apply the same qualifying criteria as institutional lenders. ii. Due to the involvement of real estate registrants in drafting the Agreement of Purchase and Sale, seller take back mortgages are not considered to be private financing Sources. iii. Private financing sources are particularly important when dealing with unique properties or buyers who have special financing needs. iv. Estates willing to place funds in the real estate market are a source of private financing. Only statements i. and iv. are correct. Only statements ii. and iii. are correct. Only statements iii. and iv. are correct. Only statements i. and ii. are correct.

Mortgage products are available in both prime and subprime markets. Which of the following correctly describes the lending criteria of a typical subprime lender?. As risk increases, a subprime lender wili seek lower equity requirements, i.e., progressively higher loan to value ratios. Subprime lenders put less emphasis on the property being financed as the higher interest rate typically being charged offsets the risk. Credit information, while essential, is not as important to subprime lenders as it is to prime lenders because of the higher interest rate. Addition security in the form collateral on other assets owned by the borrower may be required by the sub prime lender.

One of the financing options when purchasing a property is a seller take back mortgage. Which of the following is a correct statement as it relates to seller take back mortgages?. Seller take back mortgages are considered a secondary market and are always subsequent mortgages. Under existing provincial legislation, seller take back mortgages are limited-to 75% of the appraised lending value of a property. A registrant who is involved in an Agreement of Purchase and Sale which contains a seller take back mortgage must be registered under the Mortgage Brokers Act. A seller may take back a mortgage to facilitate the sale of a unique property that is proving difficult to finance through institutional lenders.

Which of the following statement is correct with respect to mortgage products?. Mortgage default insurance protects the borrower in the event of illness or loss of life. Many lenders allow homeowners to access the equity in their property by establishing a line of credit. An add-on feature to Increase the principal of the mortgage is usually referred to as a "blanket Mortgage". A "skip Payment "provision" in mortgage applies to situations when the mortgage is default, but no more than one payment in default.

Which of the following statement is correct on the topic of mortgage brokerage?. Mortgage brokers are often able to arrange mortgage payments. For a residential mortgage transaction, a mortgage broker is not permitted to charge the borrower a fee. Since brokerage is defined as representing another party, a lender who is tending their own funds is not considered to be involved in mortgage brokerage. A real estate salesperson selling a property and including a seller take back mortgage in the agreement is acting a mortgage broker.

Correctly complete the following sentence as it relates to the priority of mortgages. As a general rule, mortgage priority is determined by: The status of the mortgagee, i.e., banks and trust company mortgages always have priority over private mortgages. The time and date that the mortgage is registered on the title of the property. The rate of interest charged on the mortgage. The size of the mortgage, i.e., mortgage with the largest principal balance, is considered a first mortgage.

A mortgage generally achieves priority status by being the first mortgage registered against the title of a property but there are some exceptions. Which of the following encumbrances could take priority over a first mortgage?. A second mortgage with a principal balance greater than an existing mortgage. A subsequent mortgage that has gone into default because of non-payment of the mortgage. A judgment executed against the mortgagor before the first mortgage was registered on title. A mortgage that had been created before the first mortgage and was never registered on title.

Which of the following is the most common reason for a lender to take a legal action for default of a mortgage?. Failure to maintain insurance on a property. Failure to make mortgage payments. Failure to maintain the property in good condition. Failure to pay property taxes.

The borrower's personal covenant in the mortgage document means that: If the mortgagee has foreclosed on the property. The lender may then sue the borrower personally for any losses. If the property falls into despair, the personal covenant has been violated. If the mortgage is in default, the lender can sue the borrower personally for repayment of the loan. The lender can sue for unpaid principal, but not for interest.

Many real estate transactions involve in the purchase of title insurance. Which of the following statement is correct as it relates to title insurance?. Title insurance is only available to homeowners at the actual time of purchase of the property. The title insurance does not guarantee good title but rather provides coverage for the loss should be defective in some way. Whenever a real estate transaction involves the arranging of a new mortgage, title insurance is a must. Title insurance companies offer both loan policies and owner policies which provides the some warranties and limitations.

Mortgage products are available in both prime and subprime markets. As risk increases, a subprime lender will seek lower equity requirements, i.e." progressively higher loan to value ratios. Additional security in the form of collateral on other assets owned by the borrower may be required by the subprime lender. Credit information, while essential, is not as important to subprime lenders as it is to subprime lenders because of the high interest rate. Subprime lender put less emphasis on the property being financed as the higher interest rate typically offset the risk.

Lenders offer a variety of interest plans to mortgagors. Which of the following statement is a correct statement as it relates to fixed and variable rate mortgages?. One of the disadvantages of a variable rate mortgage is that once it is in place, it is locked in for the balance of the term regardless of the any interest rate fluctuations. A variable rate mortgage has a blended principal and' interest payment that will not change throughout entire amortization period of the mortgage regardless of the term. Short term fixed mortgages typically offer lower interest rates rather than long term fixed mortgages but it is disadvantageous if renewal date falls as interest rate rise. A variable rate mortgage typically fluctuates with the Bank of Canada rate.

The Mortgage Brokerages, lenders and Administrators Act, 2006, provides various exemptions to the licensing requirements under the Act. Which of the following would qualify as an exempt under the Act?. The mortgage brokers who limit their activities by arranging mortgages for less than $100,000. The principal broker of the mortgage brokerage is exempt, as the brokerage is the entity licensed under the Act. Real estate salesperson registered under REBBA 2002 who limits their involvement to providing information about a borrower to a lender. REBBA 2002 registrants who specialize in buying and selling mortgages.

The land Registration Reform Act attaches certain implied covenants to mortgage registered after April 1, 1995. Which of the following is one of those implied covenants?. The mortgagor agrees not to place any subsequent mortgages on the property. A mortgagor has the right to payoff the mortgage in full prior to maturity without any penalty, provided three months written notice is given to the mortgagee. The mortgagor has the automatic right of renewal at the end of the mortgage term. When the mortgage is in default, the mortgagee has the right to take possession, collect rents from tenants and sell the land.

When is a mortgagee likely to choose foreclosure rather than power of sale to remedy a mortgage default?. When they want to avoid and court involvement in the process. When they want to able to sue the mortgagor if the property sells for less than the outstanding mortgage. When it is a second mortgage taking the action and there is little or no equity in the property. When the value of the property is considerably more than the amount of the mortgage.

75 Burbury lane is listed with XYZ Real Estate Ltd. Salesperson Gibson of ABC Realty Inc. sold this property and referred his buyer client to lender Inc, For a mortgage to finance the purchase will be paying a referral fee to Gibson's real estate brokerage. According to REBBA 2002, what obligation is Gibson under concerning the referral fee?. Written disclosure of the referral fee must be given to both the seller and buyer. Provided that the interest rate on the mortgage is no higher than what is available there is no requirement to disclose the referral fee. The referral fee is considered a direct or indirect financial benefit and Gibson must disclose to the buyer client in writing at the earliest practicable opportunity. The seller of the property must be given written disclosure of the referral fee and commission, but there is no obligation to inform the buyer.

Which of the following individuals would most likely be interested in a reverse rnortgage?. A borrower who has a down payment of less than 30%. An elderly, retired couple with insufficient income to cover living expenses. A new home buyer who believes interests are going to fall and wants to' gamble on his interest rate forecast. A first-time home buyer who has a, down payment of less than 20%.

Which of the following is another name for a "blended" mortgage payment'?. Interest plus specified principal. Interest accruing. Amortized. Collateralized.

Which of the following statements is true regarding short-term interest rates?. Short-term fixed mortgage rates may offer attractive rates, but the timing can be a problem if renewal occurs as interest rates go up. A flat yield curve (rates on short and long-term mortgages are generally the same) is common in Canada. The shortest mortgage terms available in Canada are typically one year. Short-term rates are typically the highest as it allows the borrower greater flexibility to payout the mortgage sooner or refinance.

What type of creditor insurance results in the mortgage balance being paid in full upon verification of the borrower being diagnosed with a specific illness (heart attack, stroke, etc?. Critical illness protection. Mortgage life insurance. Mortgage disability insurance. CMHC insurance.