California Real Estate Practice Exam

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What role does a mortgage serve in a loan situation?

It determines the interest rate
It acts as the security instrument for the loan
It legally transfers ownership
It is a witness document

The correct answer is: It acts as the security instrument for the loan

A mortgage serves as the security instrument for a loan, meaning that it provides collateral for the lender in case the borrower defaults on the loan. While interest rate and ownership may be involved in the process of obtaining a mortgage, they are not the primary purpose of a mortgage in a loan situation. A witness document is typically unrelated to mortgages and loans.