Exam 31: A: Mortgages Foreclosures After the Recession

The average prime offer rate is the rate offered to the least qualified borrowers as established by a survey of potential borrowers.

Umberto and Tiara,who are married,borrow $110,000 from Sterling Credit Union to buy a home.The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term,subject to an acceleration clause,and secured by the home,which is their principal residence.When Umberto and Tiara have paid off $10,000 of the mortgage-still owing $100,000-they lose their jobs and stop making payments.Sterling Credit makes numerous attempts to contact the couple,but they do not respond.Meanwhile,the market value of their home has declined to $85,000.After six months,Sterling Credit decides to take steps to recover the unpaid amount of the loan.What are the lender's options? Which option seems most likely? Why? What are the steps are involved?

Fact Pattern 31-1B Northeast Bank makes mortgage loans to consumers,including Mai,to buy homes. -Refer to Fact Pattern 31-1B.For Mai's loan,Northeast provides all required disclosures.Mai has a right to rescind the mortgage

Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home.Payments on the loan remain the same for the duration of the mortgage.This is

Loan flipping occurs when a lender convinces a homeowner to refinance soon after obtaining a mortgage.

Negative amortization occurs when the monthly payments are insufficient to cover the interest due on a loan.

Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home.The loan is a twenty-year,3/1,adjustable-rate mortgage,with an initial interest rate of 4.0 percent for three years and potential increases of up to 3.0 percent to a cap of 11.0 percent.Before the loan is completed,the lender discloses the amount of the loan principal,the initial interest rate,the initial annual percentage rate,and associated fees and costs.Not disclosed are material details about the amounts of the payments when the interest rate changes.Before the first increase takes effect,Sierra decides that she wants to rescind the loan.What is a "twenty-year,3/1,adjustable-rate mortgage"? Can Sierra rescind this loan? Why or why not?

Forbearance is a process that allows a lender to legally repossess and auction off the property securing a loan.

If a loan is not paid within a reasonable time after a notice of default,the borrower will receive a notice of sale.

With an interest-only mortgage,the borrower can choose to pay only the interest portion of the monthly payment for a specified period of time.

Hill & Dale Credit Corporation makes mortgage loans to consumers secured by their principal homes.For a Hill & Dale loan to qualify as a Higher-Priced Mortgage Loan (HPML),its annual percentage rate must exceed,by a certain amount,

Riverview Bank makes a mortgage loan of $95,000 to Pomeroy to buy a home.Under federal law,if Riverview fails to provide certain material disclosures with respect to the loan,Pomeroy's right to rescind the loan

Virgil borrows $175,000 from United Finance Bank to buy a home.Federal law regulates primarily

When an owner is unable to make mortgage payments,a lender may agree to a short sale.

Erin and Dooley,a married couple,borrow $120,000 from Capital & Credit Bank to buy a home.When Erin and Dooley divorce,they are unable to make payments on the mortgage.The market value of the home has declined to less than the balance of the loan.Capital & Credit agrees to a sale of the property for this amount.This is

If a lender fails to provide certain material disclosures,a borrower has no more than seven days to rescind the mortgage.

Lenders are required to charge prepayment penalties on most subprime mortgages and home equity loans.

The annual percentage rate is the actual cost of a loan on a yearly basis.

A borrower has the right to purchase the property after default by paying the full amount of the debt,plus any interest and costs that have accrued.

Denise borrows $90,000 from Clear Lake Credit Union to buy a home.Denise loses her job and fails to make payments on the mortgage,but assures Clear Lake Credit that she will soon secure a new job.The lender agrees to postpone the payments.This is