Q&A Hero

Q: In contrast to residential mortgage loans, most fixed-rate commercial mortgages do not allow borrowers to freely prepay the principal on their loan. Which of the following prepayment penalties ties the penalty that borrowers pay to how far interest rates have declined since origination? A. Lockout provisions B. Yield-maintenance agreements C. Defeasance D. Curtailment

Q: To be enforceable, a contract must contain a written promise.

Q: While balloon mortgage loan payments are typically based on a 30-year amortization schedule, the loan actually matures in either 3, 5, 7, or 10 years. Of the following, which is the primary risk that a lender reduces their exposure to through the relatively short loan term on a balloon mortgage? A. Default risk B. Interest rate risk C. Liquidity risk D. Financial risk

Q: Generally, for an acceptance to create a non-commercial contract, the acceptance must be without qualifications or conditions.

Q: Some commercial mortgages have adjustable, or floating, interest rates. The index rate to which the contract rate is tied is typically which of the following for commercial mortgages? A. The yield on a constant maturity Treasury security of the same term B. The cost of funds index (COFI) C. The London Interbank Offer Rate (LIBOR) D. The interest rate on a comparable maturity level-payment mortgage

Q: Contracts are legally enforceable promises.

Q: Which of the following types of loans is the most common instrument used to finance the acquisition of existing commercial property? A. Fixed-rate balloon mortgage loans B. Floating-rate mortgage loans C. Mezzanine loans D. Construction loans

Q: Despite a direct grant of taxation power to Congress in the Constitution, the progressive income tax was not permitted until authorized by the Sixteenth Amendment.

Q: In recent years, lenders have been unwilling to relieve borrowers from personal liability in the event of fraud, environmental problems, or unpaid property tax obligations. Therefore, some lenders include a clause that pierces the single-purpose borrowing entity to hold the actual borrower liable in such instances. This clause is commonly referred to as a: A. habendum clause B. lockout provision C. defeasance D. "bad boy carve-out" clause

Q: The women in the house next to you party all the time and keep you up most nights. They are creating a public nuisance.

Q: One of the main differences between residential mortgage loans and permanent financing of commercial real estate lies in the allocation of liability in the case of default. In commercial real estate, a "bankruptcy remote" special-purpose entity is created that shields the actual borrower from personal liability. When a lender cannot lay claim to the personal assets of the defaulted borrower, this type of loan is commonly referred to as a: A. nonrecourse loan B. mini-perm loan C. partially amortizing loan D. interest-only loan

Q: A buyer in the normal course of business has priority over a perfected security interest.

Q: Let's assume that you have just taken out a mortgage loan for $200,000 with an origination fee of 2 points due upfront. The mortgage term is 30 years and the mortgage rate is fixed at 4%. What is the cost of the origination fee in dollar terms?A. $400.00B. $954.83C. $4000.00D. $4954.83

Q: Property ownership helps generate prosperity by establishing the conditions necessary for capital formation and prosperity.

Q: Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7 years, but amortizes over 30 years. Calculate the balloon payment at maturity (Year 7) if the interest rate on this loan is 4.5%. A. $1,646.73 B. $118,468.21 C. $282,835.42 D. $324,572.02

Q: House sitting would be an example of a bailment because you are in temporary possession of someone's house with the intention to return full possession to the owners upon their return.

Q: Suppose you have taken out a $125,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 6%. After your first mortgage payment, how much of the original loan balance is remaining? A. $1,054.82 B. $120,603.78 C. $124,570.18 D. $124,875.56

Q: A purchase money security interest creates a perfected interest without the need to put a document on public record.

Q: If a student leaves a book bag in class by accident and the professor takes possession to safeguard the bag, a bailment has been formed.

Q: Given the following information, calculate the Effective Borrowing Cost (EBC). Loan amount: $175,000, Term: 30 years, Interest rate: 7 %, Payment: $1,164.28, Discount points: 1, Origination fee: $3,250. Assume the loan is held until the end of year 10. A. 0.6% B. 3.8% C. 7.0% D. 7.4%

Q: UCC Article 9 Secured Transactions apply to both real and personal property.

Q: You have taken out a $225,000, 3/1 ARM. The initial rate of 5.8% (annual) is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period. Calculate the initial payment on the loan. (Note: the term on this 3/1 ARM is 30 years) A. $1,320.19 B. $1,422.15 C. $1,874.45 D. $1959.99

Q: Mike repaired Rosie's car and Rosie refused to pay the bill. Mike was still in possession of the car and therefore could claim a mechanic's lien on the car.

Q: If goods are being shipped by a common carrier trucking company, and the truck is hijacked by an armed robber, if the shipment is destroyed, the common carrier will be liable for the loss of the goods because the "acts of a public enemy" exception does not apply in this situation.

Q: Zoning ordinances are implemented through a state or local government's police powers.

Q: Suppose a potential home buyer is interested in taking a $500,000 mortgage loan that has a term of 30 years and a fixed mortgage rate of 5.25%. What is the monthly mortgage payment that the homeowner would need to make if this loan is fully amortizing? A. $552.50 B. $2,761.02 C. $17,820.72 D. $33,458.47

Q: In a bailment for the sole benefit of the bailor, the bailee owes a duty of slight care.

Q: Zoning laws apply to types and locations of physical structures but not to aesthetic characteristics such as color and exterior design.

Q: Given the following information, calculate the effective borrowing cost (rounded to the nearest tenth of a percent). Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Monthly Payment: $1,225.00, Discount points: 2, Other Closing Expenses: $3,611. A. 7.7% B. 8.2% C. 8.5% D. 9.1%

Q: A fee simple absolute represents total ownership of personal property.

Q: Given the following information about a fully amortizing loan, calculate the lender's yield (rounded to the nearest tenth of a percent). Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Monthly Payment: $1,225.00, Discount points: 2. A.7.7% B. 8.0% C. 8.2 % D.10.0 %

Q: Adequate enforcement is necessary for property law to function properly.

Q: Given the following information, calculate the balloon payment for a partially amortized mortgage. Loan amount: $84,000, Term to maturity: 7 years, Amortization Term: 30 years, Interest rate: 4.5%, Monthly Payment: $425.62. A. $9,458 B. $30,620 C. $73,102 D. $84,000

Q: Wayne adds value to Garth's property without Garth's permission. Garth retains ownership of the property including the improvements.

Q: Given the following information on an interest-only mortgage, calculate the monthly mortgage payment. Loan amount: $56,000, Term: 15 years, Interest Rate: 7.5%. A. $169.13 B. $350 C. $519.13 D. $4,200

Q: Easements by prescription pertain only to land around hospitals.

Q: Given the following information on a 30-year fixed-payment fully-amortizing loan, determine the remaining balance that the borrower has at the end of seven years. Interest Rate: 7%, Monthly Payment: $1,200. A. $17,143 B. $79,509 C. $164,402 D. $180,369

Q: Upon the death of a joint tenant, his interest automatically transfers to the other tenants.

Q: Given the following information on a fixed-rate fully amortizing loan, determine the maximum amount that the lender will be willing to provide to the borrower. Loan Term: 30 years, Monthly Payment: $800, Interest Rate: 6%. A. $6,707 B. $9,295.15 C. $13,333 D. $133,433

Q: You have driven to the local shopping mall in a friend's car. Explain and give examples of how you might park the car in terms of the three different standards of care depending upon the type of bailment relationship you've entered into with your friend.

Q: The APR can be a controversial measure of borrowing cost because it tends to: A. overstate the true borrowing cost by assuming we hold mortgage until maturity B. understate the true borrowing cost by assuming we hold mortgage until maturity C. overstate the true borrowing cost by assuming we do not hold mortgage until maturity D. understate the true borrowing cost by assuming we do not hold mortgage until maturity

Q: To encourage borrowers to accept adjustable rate mortgages (ARMs) rather than level-payment mortgages, mortgage originators generally offer an initial short-term introductory rate that is less than the prevailing market mortgage rate. This rate is referred to as a(n): A. margin rate B. teaser rate C. index rate D. discount rate

Q: Look around the room you're in. Name two items that would be classified as personal property and two items classified as fixtures. Fully explain why each item is so classified.

Q: One reason why adjustable-rate mortgages (ARMs) have become popular has to do with the impact that they have on the interest rate risk that is borne by the parties involved. If interest rates were to rise on a level-payment mortgage (LPM) the interest rate risk of the loan would typically be borne by: A. the borrower only B. the lender only C. both the borrower and lender D. neither the borrower nor the lender

Q: Name three types of deeds and explain how they differ.

Q: In considering a 3/1 adjustable-rate mortgage (ARM), the interest rate will be fixed for how many years? A. One year B. Two years C. Three years D. Four years

Q: Explain what eminent domain is and what must be done for it to be valid.

Q: With the recent popularity of adjustable-rate mortgages (ARM), lenders have begun to offer ARMs with different adjustment periods. Which of the following ARM choices will most likely have the highest initial rate? A. Three-year-one-year ARM B. Five-year-one-year ARM C. Seven-year-one-year ARM D. Ten-year-one-year ARM

Q: What is the difference between a public and a private nuisance?

Q: Partially amortizing mortgage loans require periodic payments of principal, but are not paid off completely over the loan's term to maturity. Instead, the balance of the principal amount is paid at maturity in what is commonly referred to as a: A. balloon payment B. early payment C. up-front payment D. payment cap

Q: What is the difference between attachment and perfection of a lien regarding Article 9 secured transactions?

Q: Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrower's preference? A. The borrower would prefer the 30-year mortgage. B. The borrower would prefer the 15-year mortgage. C. The borrower would be indifferent between the two mortgages. D. The borrower is unable to compare mortgage loans of two different maturities.

Q: What is meant by a life estate in land and why might one give someone else a life estate rather than a fee simple ownership.

Q: Recently, 15-year mortgages have increased in popularity amongst both borrowers and lenders. Which of the following groups of borrowers would typically be the least interested in a 15-year mortgage? A. Mature households with minimal financial constraints B. First-time homebuyers C. Homeowners who are refinancing to obtain a lower rate than is available on a comparable 30-year mortgage D. Homeowners who are interested in selling their property within five years

Q: Wally Wanderer finds an abandoned ranch in Wyoming and begins living there for many years. When the record owner finds out 23 years later, what is Wally's best legal argument that the land is his?

Q: While a variety of loan terms are available in a lender's mortgage menu, the most common loan term on a level-payment mortgage is: A. 7 years B. 15 years C. 30 years D. 40 years

Q: How would one determine whether found property is lost or mislaid? What are the rights of the finder of lost and mislaid property?

Q: When fully amortizing loans call for equal periodic payments over the life of the loan they are known as: A. level-payment mortgages B. adjustable-rate mortgages C. interest-only mortgages D. early-payment mortgages

Q: Explain the rule of first possession.

Q: For the purposes of estimating the effective borrowing cost (EBC), only those up-front expenses associated with obtaining the mortgage should be included, not the settlement costs associated with obtaining ownership of the property. With this in mind, which of the following costs should not be included in one's calculation of EBC? A. Discount points B. Loan origination fees C. Appraisal fee D. Buyer's title insurance

Q: Ivana's car was stolen. The car needed some repairs and the thief, Donald, had the engine replaced as well as the muffler. Donald was apprehended and the car was returned to Ivana. Which of the following is true?A.Ivana owns the car but Donald owns the engine and mufflerB.Ivana owns the car but must pay Donald for the engine and mufflerC.Donald becomes the owner due to accessionD.Ivana owns the car and owes Donald nothing

Q: When lenders charge discount points (prepaid interest) on a loan, what impact does this have on the loan's yield? A. The yield on the loan will increase. B. The yield on the loan will decrease. C. The yield on the loan will be unaffected. D. The yield on the loan automatically becomes zero.

Q: Rachel owns a beach home and wants to build a deck. Zoning restrictions limit decks to 120 square feet however Rachel wants to build one that is 144 square feet. A.If she builds it they can't make her tear it down once it's completed. B.She should ask for a nonconforming exemption. C.She should ask for a variance. D.She shouldn't bother because once zoning ordinances are in place they allow for no changes, variations or exceptions. Her only recourse is to have a new law passed raising the square foot limit.

Q: Required by the Truth-in-Lending Act, the annual percentage rate (APR) is reported by the lender to the borrower on virtually all U.S. home mortgage loans. The APR accounts for all of the following EXCEPT: A. All finance charges in connection with the loan, such as discount points, origination fees, and underwriting fees. B. All compensation to the originating brokers if one was used by the borrower. C. Any prepayment of principal to be made on the loan. D. Premiums for required forms of insurance

Q: An easement restricting what an adjoining land owner may do with their property is called a/an: A.Negative easement B.Easement by prescription C.Easement by reservation D.Easement by necessity

Q: From the borrower's perspective, the effective borrowing cost is often viewed as the implied internal rate of return (IRR), since it takes into consideration costs that the borrower faces, but which are not passed on as income to the lender. Included in this calculation are certain closing costs, which may consist of all of the following EXCEPT: A. Title insurance B. Mortgage insurance C. Recording fees D. Earnest money

Q: Danny Dog lover has five Pit Bull dogs. They bark constantly and terrify the neighbor, Terry Terrified. When Terry tries to sell his house, no one will even look at it for fear of the dogs. If Terry takes Danny to court, what should he claim that Danny has established? A.A public nuisance. B.A private nuisance. C.An adverse possession. D.An eminent domain.

Q: The monthly mortgage payment divided by the loan amount is commonly referred to as the: A. loan balance B. effective borrowing cost C. lender's yield D. monthly loan constant

Q: You're lying in bed in your dorm room when a piece of a satellite from a country that no longer exists reenters the earth's atmosphere and flies through the window landing at your feet. A.Your school has a right to claim the property because it landed on their property. B.You may keep the property because of the rule of first possession. C.You and your school must share the property as equal co-owners. D.The government can exercise its right of eminent domain and claim the property for the good of the public.

Q: Suppose an investor is interested in purchasing the following income producing property at a current market price of $490,000. The prospective buyer has estimated the expected cash flows over the next four years to be as follows: Year 1 = $48,000, Year 2 = $49,440, Year 3 = $50,923, Year 4 = $52,451. Assuming that the required rate of return is 14% and the estimated proceeds from selling the property at the end of year four is $560,000, what is the NPV of the project?A. -$12,860.53B. $145,574.52C. $331,564.96D. $477,139.47

Q: Which of the following is a valid bailment? A.Babysitting your sisters child for the weekend B.House sitting your friend's house for the weekend C.Feeding your neighbors dog (who lives in the yard in a dog house) by tossing food over the fence D.Taking your boyfriend's car to have it detailed as a birthday present.

Q: Suppose you own a house that you are renting out to a group of college students for the 10 month academic year. You are charging $1000 per month in rent. You will collect the first rent payment today and then on the 1st of the month each month thereafter. What is the value of this investment opportunity to you today if you could reinvest your income at a rate of 6%? A. $9,677.77 B. $9,730.41 C. $9,779.06 D. $11,677.03

Q: A property owner has set up a contract in which he agrees to sell a warehouse 5 years from now to the tenant who currently leases the space. The tenant has agreed to continue to pay $20,000 in rent at the end of each year, including year five, at which time he will purchase the building for an additional $1,500,000. Assuming the required rate of return on a similar investment is 10% (annual), how much is this deal presently worth to the original owner of the property? A. $1,007,197.20 B. $1,014,779.29 C. $2,281,452.80 D. $2,293,663.00

Q: According to the Congressional Budget Office, the top 20% of federal income taxpayers pay ________ of all federal income tax. A.50%. B.60%. C.70%. D.80%.

Q: Donald gives Tony a life estate in a home that Donald owns in 2008 specifying that upon the end of the life estate, the property is to go to his son, Mike. Tony dies in 2012. A.If Donald is still alive he may revoke the transfer to Mike and keep the property. B.Mike gets a reversion in 2012. C.Mike gets a remainder in 2012. D.In 2012, Mike and Donald become joint tenants until Donald's death when Mike becomes the sole owner.

Q: Suppose your personal financial goal is to retire with a million dollars in your savings account. How much must you deposit monthly in an account paying 5% a year (with interest being compounded monthly and your deposits occurring at the end of the month), to accumulate $1,000,000 by your 65th birthday if you begin your deposits on your 22nd birthday? (Note: Assume that you started with no savings in the account prior to your first deposit at age 22 and you do not make a deposit on your 65thbirthday) A. $552.13 B. $701.90 C. $21,282.95 D. $186,354.63

Q: Which of the following is not a requirement for adverse possession to apply? A.The possession must be open and notorious. B.The possession must be continuous. C.The possession must be permitted. D.The possession must be wrongful.

Q: Suppose you are starting a Ph.D. program with only $1,000 in your savings account. The university has agreed to waive your tuition, cover all of your living expenses, and pay you an additional stipend of $2,000 at the beginning of each month, as long as you teach one course per semester over the course of five years. If your savings account is able to earn 5.5% per year for the five years that you will be in this program, how much will you have accumulated in your savings account by the end of the program if interest is compounded on a monthly basis? A. $136,445.94 B. $137,708.75 C. $139, 077.35 D. $139,708.76

Q: The eminent domain clause is contained in: A.Article I of the Constitution. B.The Fifth Amendment. C.State property codes. D.State Constitutions but not the federal Constitution.

Q: Upon starting his first job after graduation, Jon has completed the necessary paperwork to set up direct deposit of his paycheck into his savings account. After taxes, medical benefits, and retirement account contributions have been taken out of John's gross salary, he is left with a direct deposit of $4000 at the end of each month. If John started with no other savings in his account, how much will John have in his savings account at the end of 12 months if he is able to earn an annual interest rate of 3%, with interest being compounded monthly? A. $48, 665.53 B. $48,787.19 C. $56,768.12 D. $58,471.16