5. Pre-Test M/C

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What is the purpose of a subordination clause in a security instrument for land purchase loans?

To prevent developers from taking out additional loans for development

To reduce the interest rates on land purchase loans

To provide higher lien priority to the security instrument for construction loans (correct)

To ensure that the developer can sell individual lots unencumbered by the lien

What does a partial release clause allow developers to do in relation to land purchase loans?

Skip making repayments on the principal amount

Extend the loan term indefinitely

Increase the interest rates on the land purchase loans

Release individual lots from the lien once specific amounts of principal have been repaid (correct)

In a deed of trust, what is the role of the trustee?

To hold legal title to the property until the loan is fully repaid (correct)

To assess the creditworthiness of the borrower

To purchase the property on behalf of the borrower

To manage and invest the funds received from the lender

Why do lenders generally require construction loans to have a subordination clause?

To reduce the risk associated with construction loans Signup and view all the answers

What benefit does a partial release clause provide to developers when selling individual lots?

Enables lots to be released from the lien once specific principal amounts are repaid Signup and view all the answers

What are the payments made up of under a straight note?

Principal and interest Signup and view all the answers

Which element is not required in a mortgage?

An identification of the promissory note Signup and view all the answers

What is a requirement to be a holder in due course of a negotiable instrument?

Must have notice of any defenses against payment of the instrument Signup and view all the answers

Which statement regarding security instruments is not true?

A lender cannot enforce a promissory note without a security instrument Signup and view all the answers

What role does the trustee play in a deed of trust?

Both B and C Signup and view all the answers

5. Pre-Test M/C

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Questions and Answers

What is the purpose of a subordination clause in a security instrument for land purchase loans?

What does a partial release clause allow developers to do in relation to land purchase loans?

In a deed of trust, what is the role of the trustee?

Why do lenders generally require construction loans to have a subordination clause?

What benefit does a partial release clause provide to developers when selling individual lots?

What are the payments made up of under a straight note?

Which element is not required in a mortgage?

What is a requirement to be a holder in due course of a negotiable instrument?

Which statement regarding security instruments is not true?

What role does the trustee play in a deed of trust?

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