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real estate finance
| Question | Answer |
|---|---|
| When the Fed lowers the reserve requirements for commercial banks, what is MOST likely to happen? | More money will become available for lending. |
| When would it be MOST appropriate for the Fed to lower the reserve requirements of its member banks? | In a sluggish economy |
| When the U.S. Treasury issues and sells short-term and long-term debt instruments to generate cash, these instruments are called | securities |
| The stock in trade for members of the Federal Home Loan Banks is what type of loan? | Real estate loans |
| The government agency that serves as the nation's fiscal manager is the | U.S. Treasury. |
| Given that the Fed's discount rate is used by many major banks to set their prime rate, the rate at which they charge their most creditworthy customers, which of these statements is TRUE? | The higher the Fed's discount rate, the higher the rate of interest for the real estate borrower. |
| The U.S. Treasury's long-term debt instruments are called Treasury bonds and run for longer than | 10 years. |
| The FDIC insures accounts up to $250,000 deposited in | Both commercial banks and thrifts. |
| In response to the financial crisis that emerged in the summer of 2007, the Fed used special programs designed to do all of the following EXCEPT | forgive credit card debt for homeowners facing foreclosure. |
| Which organization of the Fed directs and regulates the sale and purchase of its government securities? | Federal Open-Market Committee (FOMC) |
| The U.S. Treasury's intermediate-length obligations are issued for 2 to 10 years and are called | Treasury notes. |
| The FDIC supervises its member banks and thrifts by | Conducting regular examinations of their operations. |
| A buyer makes a minimal down payment and borrows the balance needed to purchase real property. This is called | leveraging |
| Making a deposit into a credit union is an example of investing in a | primary market. |
| Which activity would have the MOST significant effect on property values in a moderately sized Midwestern city? | Closing of the largest factory in the city |
| The American Recovery and Investment Act of 2009 is also called the | stimulus package. |
| In a lien theory state, who holds the equitable title? | Trustor |
| All of the following are examples of primary market participants EXCEPT | Fannie Mae. |
| The ups and downs of real estate activities are described as | real estate cycles. |
| All of the following government programs have the potential to lower a homeowner's monthly mortgage payment EXCEPT | Dodd-Frank Act. |
| Lenders manage the risk of a loan going into default by the amount the buyer is required to | leverage |
| Which is NOT a major participant in the secondary residential mortgage market? | Sallie Mae |
| Short-term real estate cycles generally run from | three to five years. |
| The Mortgage Forgiveness Debt Relief Act of 2007 provides benefits for homeowners who have lost a home in foreclosure by | not counting income as the result of a modification of a mortgage or recasting. |
| A developer is planning a new subdivision of building lots. In which case will the developer be subject to the Interstate Land Sales Full Disclosure Act? | If the subdivision will be marketed out of state |
| RESPA does NOT require that the lender provide a borrower with a | HUD-1 closing statement. |
| The funds used for lending by the FCS banks in rural areas are raised through the | sale of bonds and notes. |
| As part of the Housing and Economic Recovery Act of 2008 (HERA), HUD authorized a Neighborhood Stabilization Program to reduce sources of abandonment and blight in communities by providing funds to | acquire and redevelop foreclosed properties. |
| The annual percentage rate (APR) can BEST be described as | disclosing the true yield achieved by the lender. |
| The purchases of debt securities issued by the member banks in the Farm Credit System (FCS) are assured of timely payment of principal and interest by the | Federal Farm Credit System Insurance Corporation (FCSIC). |
| Which HUD office enforces the Fair Housing Act and other civil rights laws? | Office of Fair Housing and Equal Opportunity (FHEO) |
| Under the Home Mortgage Disclosure Act (HMDA), mortgage originators are required to report all of the following information about applicants EXCEPT | profession. |
| The secondary market for agricultural and rural housing mortgage loans was created by Congress and is known as | Farmer Mac. |
| When FHFA placed Fannie Mae and Freddie Mac into conservatorship in 2008, the Treasury was given unlimited capital to keep these entities solvent by | purchasing their stock and mortgage-backed securities. |
| The Housing and Urban Development Act of 1968 changed Fannie Mae to allow it to be reorganized as | a fully private corporation. |
| Loans that do not meet the conforming guidelines established by Freddie Mac, including maximum loan amount and down payment requirements, are called | nonconforming loans. |
| Ginnie Mae mortgage-backed securities are fully modified pass-through securities guaranteed by | the full faith and credit of the U.S. government. |
| Which act allowed the creation of the Federal Housing Finance Agency (FHFA)? | Federal Housing Reform Act of 2007 |
| In addition to the authority to purchase FHA-insured and VA-guaranteed loans, the Emergency Home Finance Act of 1970 gave Fannie Mae the authority to purchase | conventional loans. |
| A jumbo loan is a mortgage loan that | exceeds the current Freddie Mac maximum loan limit. |
| Ginnie Mae mortgage-backed securities are pools of mortgages used as collateral for the issuance of securities, commonly called | pass-through certificates. |
| What aggressive action has the FHFA taken in an attempt to recover some of the losses to Fannie Mae's and Freddie Mac's portfolios? | Sued financial institutions |
| When Fannie Mae was reorganized, it became a separate privately owned corporation subject to | federal corporate income tax. |
| Freddie Mac's automated underwriting system is | Loan Prospector (LP). |
| The principal and interest payments on pass-through certificates are "passed through" to | investors. |
| What is the main source of money for the supply of funds needed by a commercial bank? | Checking accounts |
| A mortgage broker may do all of the following EXCEPT | service the loan. |
| A consumer recently lost a briefcase containing several different types of bonds. The consumer is concerned that a person finding the briefcase will be able to cash the bonds. This is NOT a concern if the bonds are | registered bonds. |
| When sellers of a property decide to provide financing, it's usually because | other financing is not available. |
| Demand deposits are also known as | checking accounts. |
| A borrower has applied for a loan from a mortgage company that intends to process the loan and then submit it to an investor for underwriting, closing, and funding. This borrower has applied with a | mortgage broker. |
| When a company issues bonds that are a claim against its general assets, they are called unsecured bonds or | debentures. |
| When a buyer is considering requesting seller financing, it is BEST to request this arrangement | when making the offer. |
| Commercial loans are primarily designed to make loans to businesses to finance their | operations and inventories. |
| When lenders make loans on properties located far from where they can personally supervise, they may seek to invest in real estate transactions through the use of local intermediaries, called mortgage bankers or | correspondents. |
| Corporate bonds classified as coupon bonds have interest coupons attached to them that are removed as they become due and are cashed by the holder. These are also known as | bearer bonds. |
| A young couple wants to purchase a home and realizes that they are short on funds and need some assistance from their parents. The parents can assist with financing as long as a | gift form/letter is executed from the donor. |
| Which circumstance would create a voluntary lien? | Mortgage on the property |
| A lender may prefer to have a deed of trust instead of a mortgage because | foreclosure is accomplished more easily and quickly. |
| When a buyer purchases a property and the seller retains title to the property, they have executed a | contract for deed. |
| When a buyer has insufficient cash for the entire amount required to purchase a house, the seller may provide a portion of the sales price in the form of a junior encumbrance, called a | carryback loan. |
| What type of clause in a financial instrument allows a borrower to repay the balance of a loan at any time without any restriction or penalty? | Prepayment |
| The doctrine of "first in time, first in right" generally gives the first mortgage lender a priority lien position, with the only exception being | unpaid property taxes. |
| Which statement regarding a note is FALSE? | A note must be tied to either a mortgage or deed of trust. |
| In order to protect the vendee's rights to the property, a contract for deed must be | recorded. |
| What is the first step a buyer should take when considering asking the seller to carry back financing due to insufficient funds to cover the down payment? | Inform the first lien lender and the seller up front |
| The BEST answer for why a lender may include a prepayment penalty on a high-interest loan is that the lender will | lose the opportunity for high earnings. |
| A couple is purchasing their first house for $150,000. They are making a down payment of $15,000 with a mortgage loan of $135,000. The mortgage establishes a financial encumbrance on the property called a | lien |
| When a mortgage loan is fully paid, the borrower (mortgagor) regains full and clear title to the property based on which clause in the mortgage? | Defeasance |
| One of the BEST reasons to recommend that the buyer have an attorney review a contract for deed is that | all conditions of the sale are described in the contract. |
| homeowner is purchasing an investment property, but she does not have sufficient cash to cover the down payment. She decides to pledge the equity as collateral to secure funds for a short term. When these equity loans come due, the borrower usually | refinances the entire property to secure a new loan to pay all liens in full. |
| Some second lien lenders will impose a prepayment penalty if a mortgage is paid off within six months after closing. This would be an example of what type of prepayment penalty? | Lock-in clause |
| A 30-year self-amortizing loan of $195,000 at 6% interest has a fixed principal and interest payment $1,170. How much is applied to principal? | $195.00. $195,000.00 × 6% = 11,700.00 ÷ 12 = $975; $1,170 – 975 = $195. |
| The conforming loan limit set by the Federal Housing Finance Agency (FHFA) for single-family residences is | $417,000. The loan limit is set to be equal to 115% of local median house prices and cannot exceed 150% of the standard limit. |
| Most variable-rate loans include an annual cap or payment cap, plus a | life-of-the-loan interest cap. The combination of caps provides the borrower with protection with debilitating payment increases. |
| If borrowers are current on their mortgage, when will their private mortgage insurance automatically be dropped? | 78% LTV. The Homeowner Protection Act require that PMI be droped when the loan reach 78% of its origination amount. The borrower can request that the PMI be dropped when the loan reach 80%, taking into account improvement &apreciation. Fanie Mae and Fredi |
| All of these practices are examples of predatory lending EXCEPT | requiring homebuyer education and counseling. |
| A 15-year self-amortizing loan of $200,000 at 6% interest has a fixed principal and interest payment of $1,688. How much of the payment will be credited toward interest on the first payment? | $1,000. $200,000 × 6% = 12,000 ÷ 12 = $1,000. |
| According the provisions of the Housing and Economic Recovery Act of 2008 (HERA), the national loan limit is set based on changes in home prices over the previous year, but may NOT | decline from year to year. |
| A feature of an adjustable-rate mortgage that allows a change to a fixed interest rate after the initial adjustment periods have been completed is called a | convertible loan feature. |
| The strategy of a borrower avoiding a PMI premium by having a first and second lien closing simultaneously is called a | split loan. |
| In the financial world, which loan designation would indicate a very high-risk loan? | D |
| A 30-year self-amortizing loan of $120,000 at 5% interest has a fixed principal and interest payment of $644.40. How much of the payment will be applied to principal? | $144.40. $120,000.00 × 5% = $6,000.00 ÷ 12 = $500.00; $644.40 - 500 = $144.40. |
| What is the designation for the types of loans sold to Fannie Mae and Freddie Mac on the secondary market? | Conforming loans |
| Under Regulation Z, borrowers applying for an adjustable-rate mortgage must receive all of the following EXCEPT | a homebuyer education course. |
| The strategy of using a split loan when financing a property to avoid private mortgage insurance is also called a | piggy-back loan. |
| A borrower with a low credit score and limited income has been approved for a high-interest loan that cannot be paid off for three years and charges more than six months' interest as a penalty. This would BEST be described as | an abusive prepayment penalty. |
| When FHA loans were introduced in 1934, the aspect that made them attractive to lenders was that | the government insured the full amount of the loan. |
| FHA loans require a minimum down payment of | 3.5%. This is the minimum amount required as part of the borrower's investment as set by current FHA guidelines |
| A borrower purchasing a home using FHA financing is making the minimum investment of 3.5% to purchase a home priced at $150,000. What is the amount of the up-front MIP premium based on 1.75%? | $2,533.13. $150,000 × 96.5% = 144,750 × 1.75% = $2,533.13. |
| VA loans are acceptable to lenders even with zero percent down payment because | the VA guarantees the first 25% of the allowable loan. |
| A veteran is no longer liable for a VA loan in any of the following situations EXCEPT | the veteran is active duty. |
| FHA protects itself against the risk of defaulting borrowers by requiring a | mortgage insurance premium. |
| A borrower interested in purchasing a home priced at $150,000 would be required to make a down payment of | $5,250. $150,000 × 3.5% = $5,250. |
| What is the annual MIP paid monthly on an FHA loan with a contract price of $150,000? | $150.78. $150,000 × 96.5% = $144,750 × 1.25% = $1,809.38 ÷ 12 = $150.78. |
| With a loan guarantee of $104,250, a veteran wishing to purchase a home in Alaska would be eligible for a mortgage loan of | $625,500. Alaska is categorized as a high-cost area, so an additional 50% is added to the loan limit. 4 × $104,250 = $417,000 × 50% = $208,500 + 417,000 = $625,500. |
| A veteran can ask the VA for a substitution of entitlement if the home is sold to | another qualified veteran willing to assume the loan. |
| The direct endorsement program allows a lender to | underwrite FHA loans without sending them to FHA. |
| A borrower interested in purchasing a home priced at $180,000 is making an offer showing a down payment of the FHA minimum requirement. The loan amount before the MIP would be | $173,700. $180,000 × 96.50 = $173,700. |
| What is the PITI on an FHA loan with a price of $150,000 and interest rate of 6% for a 30-year term, annual taxes of taxes of $1,800, and an annual hazard insurance premium of $700? | $1,242.81. $150,000 × 96.5% = $144,750 × 1.75% = $2,533.13 + $144,750 = $147,283.13. : $1,800 ÷ 12 = $150; $700 ÷ 12 = $58.33: $144,750 × 1.25% = $1,809.38 ÷ 12 = $150.78: $147,283.13 × 6 = $883,698.78 ÷1000 = $883.70 P&I + $150.78 MIP + $150 tx + $58.33 |
| The amount of entitlement for which a veteran is eligible is shown on the | certificate of eligibility. |
| A purchaser assumes a VA loan and agrees to provide a full release of liability for the veteran in case of default on the loan that is accepted by the lender. This is called a | novation. |
| The first basic procedure usually followed in processing a loan is to | determine the borrower's ability to repay the loan. |
| What is the legal term for a credit bureau under the federal Fair Credit Reporting Act (FCRA)? | Consumer reporting agency |
| An appraiser working on a residential appraisal has just completed a search of the records for comparable residential properties that have sold within the last three months. The appraiser is using the | direct sales comparison approach. |
| All these methods are used to determine assurance of good title EXCEPT | U.S. census report. |
| The borrower must receive a good-faith estimate of all costs on the loan and the property within three business days of application according to the | Real Estate Settlement Procedures Act. |
| Because of the increase in high loan-to-value (LTV) ratios and long-term amortization, lenders place more emphasis on the | borrower's ability to pay the mortgage. |
| A consumer is trying to raise his credit score, so he stops using all his credit cards for one year. Why is this a bad idea? | Inactive credit cards do not contribute to a credit score. |
| An appraiser assigned the task of appraising a unique property, such as a church for sale, would probably use the | cost approach. |
| The problem with using an abstract of title is that it does NOT disclose | hidden title hazards. |
| Points may be charged by lenders on real estate loans to | increase the lender's yield. |
| After executing a contract, every formal real estate loan process begins when the borrowers | complete a standard loan application. |
| The credit scoring system uses statistical information to compare a consumer's information to the credit performance of | consumers with similar credit files. |
| The cost approach method of estimating a property's value is based on the current value of its | physical parts. |
| The type of title insurance that includes the states as the guarantor of title is called | the Torrens system. |
| The first payment on a loan that closes on May 15 will usually be due | July 1. Payment made in July covers the interest from June because interest on a mortgage loan is in arrears (behind you). |
| When a breach in one of the terms or conditions of a loan agreement results in a default, which clause in the contract is activated? | Acceleration |
| Before a lender decides to foreclose, full consideration is given to all of the following EXCEPT | current interest rate. |
| The widespread criticism of the lack of borrower property rights under old English law created such a demand for action that the decision was made to adjudicate these grievances in which type of court? | Court of equity |
| The biggest benefit to a lender who uses the power-of-sale method to foreclose on a property is that it | does not require judicial (court) procedure. |
| All of these can cause a default on a mortgage EXCEPT | updating the appliances. |
| What is an alternative to foreclosure that has gained more popularity in recent years because of borrowers being underwater on their mortgages and only able to sell their homes for less than the amount owed? | Short sales |
| The system that developed to allow distressed borrowers extra time to raise the funds necessary to protect their property from foreclosure is called | an equitable redemption period. |
| The MOST common technique used for a delinquent FHA mortgage where it is determined that the default was caused by circumstances beyond the borrower's control is | forbearance of foreclosure for a one-year period. |
| A borrower has been making payments by the 15th of the month on his mortgage for the past three years, but because of a recent layoff, he has not been able to make a payment for the past two months. The loan is considered to be | in default. The borrower was in breach of the loan agreement as soon as the payment was not made in 30 days. |
| Which of the following is the BEST indicator for the lender that the borrower has abandoned the property? | Mail returned and no forwarding address provided |
| To provide relief to lenders when borrowers will not vacate their property after the equitable redemption period, a formal process was put in place that results in the decree of foreclosure. It is known as | strict forfeiture. This process provided guidelines for the appropriate conditions in which the lender could terminate the equitable period of redemption. |
| Before a lender forecloses on a conventional mortgage loan, the mortgagor is notified of the default and the reasons for it. The mortgagor is required to | provide an immediate solution. |
| How many states recognize community property? | 10 |
| When was the Veterans Housing Assistance Program (VHAP) created? | 1983. VHAP was created to help veterans purchase a house. |
| The Amy Young Barrier Removal (AYBR) program funds home modifications for | low-income persons with disabilities. |
| If a married couple purchase property in Texas, the property is said to be | undivided and equal. |
| The Texas Veterans Commission was created in | 1927. |
| What is the primary purpose of the Housing Tax Credit (HTC) program? | Direct private capital toward creating affordable rental properties |
| In what year were Texas residents allowed to start borrowing against their home's equity? | 1997 |
| What is the VLB's minimum acreage for land? | 1 |
| The Contract for Deed Conversion Initiative is available to eligible residents who are currently | purchasing residential property within 150 miles of the Texas–Mexico border. |
| A consumer borrowed $2,000 on a credit card at 10.5% interest. The loan will be repaid in nine months. What amount will be repaid when the nine months have elapsed? | $2,157.50. $2,000 × 0.105 = $210; $210 ÷ 12 × 9 = $157.50; $2,000 + $157.50 = $2,157.50. |
| Two discount points cost a seller $3,300. What is the amount of the loan? | $165,000. $3,300 ÷ 0.02 = $165,000. |
| An older building being used for storage is valued at $100,000 and produces a net operating income of $12,000 per year. What is the overall capitalization rate for this property? | 12%. $12,000 ÷ $100,000 = 0.12 or 12%. |
| The interest on a 10% cash advance loan was $72 for six months. What was the principal amount of the loan? | $1,440. $72 ÷ 6 × 12 = $144; $144 ÷ 0.1 = $1,440. |
| What is the maximum monthly PITI payment that a prospective buyer can pay if the buyer earns $3,300 monthly and the lender applies 28/36 qualifying ratios? | $924. $3,300 × 0.28 = $924. |
| A property produces a net operating income of $12,000 per year. If a prospective buyer wants to have a 15% capitalization rate, what amount will the buyer pay for this property? | $80,000. $12,000 ÷ 0.15 = $80,000. |
| How many months will it take for $15,000 to yield $1,125 at 10% interest? | 6. $15,000 × 0.1 = $1,500; $1,125 ÷ $1,500 = 0.75; 0.75 ÷ 12 = 6. |
| 90% conventional loan for 20 year @ 4%. It will require a month principal and interest payment of $6.06 per $1,000 of the loan amount. The lender lets him do25% of he gross monthly income to a principal and interest payment. How much financing can he qua | $280,528.00. $6,800 × 0.25 = $1,700; $1,700 ÷ $6.06 × $1,000 = $280,528.00 (rounded). |
| Using the cost approach to compute value, an appraiser estimated the remaining economic life, or years of useful life, of a building to be 40 years. The replacement cost of the building is estimated at $170,000, and the building is eight years old. The cu | $136,000. $170,000 ÷ 40 × 8 = $34,000; $170,000 – $34,000 = $136,000. |
| A borrower interested in purchasing a home priced at $150,000 would be required to make a down payment of | The answer is $5,250. $150,000 × 3.5% = $5,250. |
| A borrower purchasing a home using FHA financing is making the minimum investment of 3.5% to purchase a home priced at $150,000. What is the amount of the up-front MIP premium based on 1.75%? | The answer is $2,533.13. $150,000 × 96.5% = 144,750 × 1.75% = $2,533.13. |
| What is the annual MIP paid monthly on an FHA loan with a contract price of $150,000? | The answer is $150.78. $150,000 × 96.5% = $144,750 × 1.25% = $1,809.38 ÷ 12 = $150.78. |
| With a loan guarantee of $104,250, a veteran wishing to purchase a home in Alaska would be eligible for a mortgage loan of | The answer is $625,500. Alaska is categorized as a high-cost area, so an additional 50% is added to the loan limit. 4 × $104,250 = $417,000 × 50% = $208,500 + 417,000 = $625,500. |
| What is the PITI on an FHA loan with a price of $150,000 and interest rate of 6% for a 30-year term, annual taxes of taxes of $1,800, and an annual hazard insurance premium of $700? | The answer is $1,242.81. $150,000 × 96.5% = $144,750 × 1.75% = $2,533.13 + $144,750 = $147,283.13 final loan amount. Convert annual taxes to monthly: $1,800 ÷ 12 = $150; monthly hazard insurance: $700 ÷ 12 = $58.33; annual MIP paid monthly: $144,750 × 1.2 |
Created by:
jacobmac1981