Real Estate 306 Exam 2 Questions With Correct Answers
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Course
Real Estate 306
Institution
Real Estate 306
Real Estate 306 Exam 2 Questions With
Correct Answers
The action of taking possession of a mortgaged property when the mortgagor fails to keep up
their payments - answerForeclosure
A claim or legal right against assets that are typically used as collateral to satisfy a debt -
answerLien
a non...
Real Estate 306 Exam 2 Questions With
Correct Answers
The action of taking possession of a mortgaged property when the mortgagor fails to keep up
their payments - answer✔✔Foreclosure
A claim or legal right against assets that are typically used as collateral to satisfy a debt -
answer✔✔Lien
a non-binding financing commitment - answer✔✔Term Sheet
A loan committee that consists of upper management of a lending institution with the authority
to approve loans that the initial loan officer does not have the authority to approve -
answer✔✔Credit Committee
An entity created for a specific purpose such as a LLC or LP - answer✔✔Special Purpose Entity
(SPE)
Part of the organizational documents that identifies the relationship between
investors/owners/developer is a deal and spells out their percentage ownership interests and any
rights responsibilities and profit splits - answer✔✔Operating Agreement
A type of loan used to purchase real estate, where the borrower agrees to pay the lender over
time, typically in a series of regular payments that are divided into principal and interest. The
property serves as collateral - answer✔✔Mortgage
Also known as a mortage _____, or promissory ______, is a legal document that binds the
borrower to repay the mortgage within an agreed period and outlines the terms of the loan -
answer✔✔Note
Promise by a third-party entity, or individual, to pay or perform the obligations of the borrower -
answer✔✔Guaranty
The process of reducing or paying off the principal of the loan, typically in regular installments -
answer✔✔Amortization
The amount of capital borrowed (the return OF capital for the bank) - answer✔✔Principal
The cost of debt, i.e., what the borrower pays the lender for using its funds (the return ON capital
for the bank) Typically made up of the index rate plus a margin - answer✔✔Interest Rate
Typically, a widely available quoted rate such as WSJ Prime Rate, LIBOR, SOFR which reflects
the lender's cost of capital and is used in determining a portion of the interest rate for a loan -
answer✔✔Index
Also called a spread, is the portion of the interest rate for a commercial real estate loan that
represents the lender's premium for the risk they are taking loaning the money -
answer✔✔Margin
The ratio of a loan to the value of the asset represented as a percentage - answer✔✔Loan to
Value (LTV)
ratio of operating income available to debt servicing for principal and interest - answer✔✔Debt
Service Coverage Ratio (DSCR or DCR)
Payments, typically monthly, for the principal and interest owed on a loan for that period -
answer✔✔Debt Service
The market where loans are created such as commercial banks, credit unions, mortgage banking
companies - answer✔✔Primary mortgage market
The markets where loans are resold to government sponsored entities such as Fannie Mae or
Freddie Mac, which creates liquidity in the primary mortgage market - answer✔✔Secondary
mortgage market
A debt-based security (similar to a bond) backed by the interest paid on loans for residences -
answer✔✔Residential Mortgage Backed Securities (RMBS)
A type of mortgage-backed security backed by commercial real estate and mortgages rather than
residential real estate - answer✔✔Commercial Mortgage Backed Securities (CMBS)
The purchaser of the most risky tranche of CMBS securities that steps in as the special servicer if
a loan included in the pool is in default - answer✔✔B-Piece buyer (Special Servicer)
The capital stack refers to the sources of funds for a real estate transaction and is typically
comprised of debt and equity - answer✔✔Capital Stack
Money that is borrowed that must be repayed - answer✔✔Debt
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