WRES Wyoming Real Estate Salesperson - Set 5 - Part 3

Under lien theory the borrower retains title and the lender holds only a lien; the lender must foreclose through the courts to enforce the security, because it never owns the property while the loan remains unpaid.
Option a is incorrect because title theory holds the opposite, giving the lender legal title until the debt is paid; because this scenario leaves title with the borrower and grants the lender only a lien, it contradicts what title theory requires.
Option b is incorrect because intermediary theory blends the two approaches, letting the borrower keep title until default and then shifting it to the lender; the facts describe a straightforward lien throughout, not this conditional transfer triggered by a missed payment.
Option c is incorrect because defeasance is not a theory of who holds title but a mortgage clause that cancels the lien once the debt is fully paid; treating it as a title theory misuses a term that describes a contractual provision.

USDA rural development loans help low- and moderate-income buyers purchase homes in designated rural areas with no down payment; the Department of Agriculture guarantees the financing, and eligibility depends on both household income and property location.
Option a is incorrect because an FHA-insured loan is available nationwide regardless of rural location and requires a down payment along with mortgage insurance; it is not the Agriculture Department program tied to eligible rural addresses that this family used.
Option b is incorrect because a VA-guaranteed loan is reserved for eligible veterans and service members; because qualification here rested on rural location and income rather than military service, the Veterans Affairs guaranty does not describe this family's financing.
Option d is incorrect because a jumbo conventional loan finances amounts exceeding standard limits and typically demands strong credit and sizable down payments; that high-balance, non-government product is the opposite of the modest rural mortgage this family obtained.

The VA-guaranteed loan lets eligible veterans and service members borrow with no down payment; the Department of Veterans Affairs guarantees a portion of the loan, so lenders extend favorable terms without requiring mortgage insurance.
Option b is incorrect because an FHA-insured loan serves the general public and still demands a down payment plus mortgage insurance premiums; it does not offer the zero-down guaranty tied specifically to military service that the veteran described.
Option c is incorrect because a USDA rural loan can also allow no down payment, but it targets moderate-income buyers in designated rural areas, not veterans; eligibility rests on property location and income rather than military status.
Option d is incorrect because a conventional bank loan carries no government guaranty at all; without that backing lenders usually require a down payment and private mortgage insurance on high-balance loans, which defeats the no-money-down benefit sought here.

A deed of trust involves three parties, and the trustee is the neutral party who holds bare legal title as security; the trustee can convey the property at a trustee's sale if the borrower defaults on the debt.
Option a is incorrect because the trustor is the borrower who conveys title to the trustee and signs the note; because the trustor is the one being financed rather than the party holding security title, this term identifies the wrong participant here.
Option b is incorrect because the beneficiary is the lender for whose benefit the trust is created; while the beneficiary receives the loan payments and the note, it does not hold the property's title, which the trustee keeps until reconveyance.
Option d is incorrect because the mortgagee is a party to a mortgage, not a deed of trust; since this scenario expressly uses a deed of trust with three parties, the two-party mortgage terminology does not fit the roles being described.

FHA-insured loans carry a mortgage insurance premium, called MIP, that shields the lender if the borrower defaults; borrowers pay an upfront amount plus annual premiums, which lets the FHA back loans with low down payments.
Option a is incorrect because private mortgage insurance is the parallel charge on conventional loans, not FHA financing; it is issued by private insurers rather than a federal agency, so it is the wrong label for a government-insured mortgage.
Option c is incorrect because a VA funding fee applies only to veterans using a loan guaranteed by the Department of Veterans Affairs; this borrower is using FHA insurance, so the funding fee belongs to an entirely different program.
Option d is incorrect because a homeowner's hazard premium insures the physical structure against fire and storms, protecting the owner's property, not the lender against default; it addresses casualty loss and has nothing to do with mortgage-default coverage.

The mortgagor is the borrower who pledges real property as security for a loan; the term ends in -or because this party gives the mortgage to the lender, granting a lien while retaining ownership of the home.
Option a is incorrect because the mortgagee is the lender that receives the mortgage and holds the lien, not the borrower; because the suffix -ee marks the party receiving the security instrument, applying it to the person who borrows reverses the two roles.
Option b is incorrect because a beneficiary is the lender under a deed of trust, a different security instrument used in some states; that label belongs to trust-deed financing, so it does not name the borrowing party in a standard mortgage arrangement.
Option c is incorrect because the trustee is a neutral third party that holds title in a deed of trust until the debt is repaid; a trustee neither borrows nor lends, so this role cannot describe the person taking out the loan.

Predatory lending covers abusive practices like hidden terms, equity-stripping through needless refinancing, and inflated appraisals that exploit vulnerable borrowers; when false statements such as a rigged appraisal deceive a lender or borrower, it also crosses into mortgage fraud.
Option a is incorrect because prudent underwriting means carefully verifying a borrower's ability to repay and lending on sound terms; the scenario describes the opposite, deception and equity-stripping, so responsible underwriting is precisely what these tactics abandon.
Option b is incorrect because loan servicing refers to routine administration of a loan after closing, such as collecting payments and managing escrow; it is a neutral operational function, not the deceptive origination conduct harming the borrower here.
Option d is incorrect because a comparative market analysis estimates a property's likely selling price from recent comparable sales; it is a pricing tool used in listings, entirely unrelated to the abusive loan terms and inflated appraisal described in this scenario.

The Equal Credit Opportunity Act forbids creditors from discriminating in any credit transaction based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance; refusing this applicant on those grounds violates the statute.
Option a is incorrect because the Fair Housing Act bars discrimination in the sale or rental of housing rather than in credit decisions generally; although its protected classes overlap, the wrong here is a lending denial, which the credit statute governs directly.
Option c is incorrect because the Truth in Lending Act governs disclosure of credit costs and terms, not the fairness of approvals; it ensures borrowers understand what they pay but says nothing about discriminatory denials based on marital status or income source.
Option d is incorrect because the Community Reinvestment Act encourages banks to meet credit needs of their entire communities, including lower-income neighborhoods; it addresses institutional lending patterns, not protection of an individual applicant against discrimination on marital status or public assistance.

A term loan, or straight loan, calls for interest-only payments throughout the term and repayment of the whole principal in a single lump sum at maturity; none of the principal is retired until that final payoff.
Option b is incorrect because an amortized loan blends principal and interest into each payment, so the balance falls steadily and disappears by the end; because this loan pays interest only and leaves the full principal outstanding, it is not amortizing.
Option c is incorrect because a balloon loan partially amortizes before a large lump sum comes due; the described loan pays no principal at all until maturity, so it is a pure straight loan, not a balloon.
Option d is incorrect because a construction loan advances funds in stages as building progresses and is repaid when permanent financing replaces it; it concerns how money is disbursed during construction, not an interest-only payoff, so it does not match.

RESPA prohibits giving or accepting any portion of a charge for settlement services other than for services actually performed; a fee split where no work was done is an unearned fee, and the statute expressly forbids it.
Option a is incorrect because a legitimate service charge compensates a provider for work genuinely completed; the facts state no service was performed, so calling this a proper charge ignores the missing work that makes the fee unlawful.
Option b is incorrect because a permitted volume discount involves a genuine price reduction for high volume, not a payment for phantom services; RESPA allows real discounts but never sanctions splitting a fee that corresponds to no performed work.
Option c is incorrect because a required escrow deposit sets aside the borrower's own funds for future taxes and insurance; it is not a charge paid to a provider, so it has nothing to do with the unearned-fee prohibition.