Test Bank Answer Key
Chapter 11 Mortgage Forms and Provisions
TRUE/FALSE
1. A legal document that creates a security interest in personal property is known as a
financing statement.
2. A legal document that creates a security interest in personal property is known as a
security agreement.
3. A real estate loan in which the borrower is not personally responsible for the repayment
of the loan is an exculpated loan.
4. A real estate loan in which the borrower is not personally responsible for the repayment of the
loan is a construction loan.
5. A provision in a mortgage that requires a borrower to pay to the lender 1/12th of the taxes and
1/12 of the insurance premium with each mortgage payment is known as an escrow provision.
6. A provision in a mortgage that requires a borrower to pay to the lender 1/12th of the taxes
and 1/12 of the insurance premium with each mortgage payment is known as a habendum
provision.
7. Mortgages are generally signed by both mortgagor and mortgagee.
8. Mortgages are generally signed by the mortgagee.
9. Mortgages are generally signed by the mortgagor.
10. It is legally permissible for a lender to prohibit the sale of the mortgaged property without the
lender’s consent.
11. The “due on sale” provision in a mortgage means that if the mortgage is sold, the debt secured
by the mortgage will become due and payable.
12. If personal property consists of fixtures, the UCC financing statement must be filed in the
county where the real estate is located on which the fixtures are attached.
13. If the personal property described in a financing statement includes fixtures, the UCC–1
financing statement must be filed in the county of the debtor’s residence.
14. It is unusual for a mortgage to provide that the mortgagee shall have any claim to insurance
proceeds payable as a result of a casualty of the secured property.
15. Most mortgages provide that a lender shall have a right to receive insurance and condemnation
proceeds in the event of a casualty or taking of the secured property.
16. A construction loan agreement will generally require that the borrower submit proof that all
utilities such as water, electricity, and gas are available to the property.
17. The provision in a construction loan agreement that requires that a certain percentage of the
loan proceeds be held and not disbursed until completion of construction is known as an escrow
provision.
18. The provision in a construction loan agreement that requires that a certain percentage of the
loan proceeds be held and not disbursed until completion of construction is known as a
retainage provision.
19. Construction loan agreements commonly provide that a lender will have a right to take
possession of the real property in the event of default and complete the construction.
20. A construction loan agreement by its terms will make the lender an agent of the borrower and
responsible for the construction or the payment of the costs of the construction.
21. An assignment of rents and leases must be executed by the property owner and all of
the tenants.
22. An assignment of rents and leases is generally signed only by the property owner.
23. A cross-default means that a default under one provision of a mortgage will constitute a default
under another provision of the mortgage.
24. A cross-default means that a default under one loan document such as a mortgage would
constitute a default under another loan document such as an assignment of rents.
25. The debtor’s signature is no longer required on a UCC–1 financing statement.
26. Some states permit UCC–1 financing statements to be filed electronically.