Exam (elaborations)
PA RE Fundamentals Quiz -12 (1)
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PA RE Fundamentals Quiz -12 (1)
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PA RE Fundamentals Quiz #12The three major components of the real estate financing market are the Federal Reserve
System, the primary mortgage market, and the secondary mortgage market.
a. True
b. False - ANS-A. TRUE.
To understand the real estate financing market, it is important to understand the three major
components: the Federal Reserve System; the primary mortgage market; and the secondary
mortgage market.
The Federal Reserve System regulates the flow of money and interest rates in the marketplace
through its member banks by controlling their reserve requirements.
a. True
b. False - ANS-A. TRUE.
The role of the Federal Reserve System (also known as "the Fed") is to maintain sound credit
conditions, help counteract inflationary and deflationary trends, and create a favorable economic
climate. It does so by regulating the flow of money and interest rates in the marketplace through
its member banks by controlling their reserve requirements and discount rates.
In Pennsylvania, mortgage bankers and mortgage brokers must be licensed and conduct
business in accordance with the Real Estate Licensing Act.
a. True
b. False - ANS-B. FALSE.
In Pennsylvania, mortgage bankers and mortgage brokers must be licensed and conduct
business in accordance with the Mortgage Bankers and Brokers Act. The Department of
Banking issues these licenses and governs the licensees' activities, with the State Real Estate
Commission also having certain limited authority when these individuals are licensed real estate
brokers and salespersons as well.
The secondary mortgage market is where lenders often seek investors for the loans they
originate.
a. True
b. False - ANS-B. FALSE.
, Lenders in the primary mortgage market often seek investors for the loans they originate. The
secondary mortgage market is where loans are bought and sold only after they have been
funded.
Warehousing agencies and investment brokers purchase a number of mortgage loans and
assemble them into packages of loans called collateral documentation.
a. True
b. False - ANS-B. FALSE.
Warehousing agencies and investment brokers purchase a number of mortgage loans and
assemble them into packages of loans called pools. Securities that represent shares in these
pooled mortgages are then sold to investors. Loans eligible for sale to major
government-affiliated warehousing agencies must satisfy those agencies' criteria for collateral,
borrower, and documentation.
Pennsylvania historically has been a lien theory state in which foreclosure is not required to
obtain legal title.
a. True
b. False - ANS-B. FALSE.
A number of states, including Pennsylvania, have adopted an intermediary theory. Pennsylvania
historically has been a title theory state. But as an intermediary theory state, the property owner
does not automatically forfeit the real estate on default of the debt. The borrower must first be
given a notice of intention to foreclose before the lender can file suit and proceed with
foreclosure.
Nonrecourse lending is the term used to describe the pledging of property as security for
payment of a loan without surrendering possession of the property.
a. True
b. False - ANS-B. FALSE.
Hypothecation is the term used to describe the pledging of property as security for payment of a
loan without surrendering possession of the property. A pledge of security—a mortgage—cannot
be legally effective unless there is a debt to secure.
Lenders are NOT permitted to charge prepayment penalties on mortgage loans insured or
guaranteed by the federal government.
a. True
b. False - ANS-A. TRUE.
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