Real Estate Finance Practice exam with complete solutions

A __________ is a permanent change in one or more of the terms of a borrower's loan. Loan Qualification Loan Modification Loan Approval Loan Origination - ANSWER-Loan Modification What time period must borrowers have in job history with the same employer to qualify? 2 months 6 months 1 year 2 years - ANSWER-2 years Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to benefit the lender. Predatory lending Sub prime Mortgage Participation Agreement Fraud - ANSWER-Predatory lending Why do lender care about unpaid taxes? They want to ensure your mortgage payment is not late It makes the loan difficult to sell in the secondary market Unpaid property taxes are a superior lien to the right of the lender Lenders don't care about unpaid taxes - ANSWER-Unpaid property taxes are a superior lien to the right of the lender A burden, obstruction, or impediment on the property that lessens its value or makes it less marketable. Lien Interest Encumbrance Mortgage - ANSWER-Encumbrance Which party is not included on the deed of trust? Mortgagor Mortgagee Trustor Trustee - ANSWER-Trustor The mortgage or deed of trust will contain ___________ that permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults. Due on sale clause Acceleration clause Alienation clause Balloon clause - ANSWER-Acceleration clause One of the largest buyers of securities is _________. Credit Unions Pension Funds China American Public - ANSWER-Pension Funds A company or individual that originates mortgage loans and sells them to investors, while taking care of borrowers loan payments, records, taxes, and insurance. Mortgage Bankers Mortgage Brokers Loan Originators Secondary Market - ANSWER-Mortgage Bankers The largest buyer of residential mortgages in the United States today. FHLMC GNMA Banks FNMA - ANSWER-FNMA Provides cash advances to members, including community banks, thrifts, credit unions and community development financial institutions. FNMA FHLMC FHLB Banks - ANSWER-FNMA Loan amount is $337,500. Down payment is $37,500. What is the LTV? 10% 11% 90% 91% - ANSWER-90% The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transactions. Money market Primary market Secondary market Origination market - ANSWER-Primary market A collaboration among lenders to share in a loan too big to handle for any one of them. Participation loan Collaboration loan Shared loan Co-Operation loan Next question - ANSWER-Participation loan The lender or the mortgage broker must provide a GFE within ____________ of receiving the application or other required information. 24 hours 3 days One business day 3 business days - ANSWER-3 business days A ___________ is a form that lists basic information about the terms of a mortgage loan for which the consumer applied. HUD-1 Deed of Trust Closing Statement GFE - ANSWER-GFE _____________ serves as a financial and administration resources that helps provide essential services and affordable housing opportunities to Texans who qualify for this assistance based on their income level. USDA FHA TDHCA CFPB - ANSWER-TDHCA The Safe and Fair Enforcement for Mortgage Licensing Act (SAFE Act) has been transferred to the ____________ for administration and enforcement. APA CFPB RESPA FHA - ANSWER-CFPB ___________ is about closing costs and settlement procedures. TILA RESPA SAFE Regulation Z - ANSWER-RESPA Sales price is$475,000. LTV is 90%. Tax rate is $1.97/$100. closing is July 17th. Using a banker's year, prorate the taxes. Assume no leap year. Credit the buyer $5120.03 Debit the seller $4608.57 Credit the buyer $4631.22 Debit the seller $5146.02 - ANSWER-Credit the buyer $5120.03 The purpose of __________ is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA RESPA SAFE HUD-1 - ANSWER-TILA The ___________ is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate. Redline TILA CRA Fair Credit Act - ANSWER-CRA A current medium of exchange collectively in the form of coins and banknotes. Trusts Securities Money Bonds - ANSWER-Money In the United States, money is controlled by the ____________. Congress Wall Street Banks The Federal Reserve - ANSWER-The Federal Reserve _______________ are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities. FDIC Reserve requirements Discount requirements None of the above - ANSWER-Reserve requirements Sale price is $323,500 and the LTV is 85%. Closing date is June 27th. Using an actual year, calculate the monthly PMI factor is .0033 $88.96 $75.62 $63.95 $92.30 - ANSWER-$75.62 The evidence of indebtedness. Credit instrument Lien Debt Promise - ANSWER-Credit instrument All of the following are functions of the department of Treasury EXCEPT: Managing Federal finances Currency and coinage Determining national debt Enforcing Federal finance and tax laws - ANSWER-Determining national debt Major responsibilities of the Mint include all of the following EXCEPT: Manufacturing and selling platinum, gold and silver bullion coins Distributing U.S. coins to the Federal Reserve banks and branches Receiving, redeeming and processing mutilated coins Education for collectors on rare coins - ANSWER-Education for collectors on rare coins Federal Home Loan Banks are cooperatives. True False - ANSWER-True Insurance is $2800/year. Sales price $437,500. LTV is 95%. Insurance start date is December 5th. Close date is August 13th. Using a banker's year, calculate the monthly insurance payment. Assume no leap year. $7.78 $233.33 $255.00 $1983.90 - ANSWER-$233.33 The science that describes the management, creation and study of money, banking, credit, investments assets and liabilities. Economics Finance Credit Banking - ANSWER-Finance Most real estate cycles in Texas are determined by: Politics and demand Economics and politics Economics and supply Supply and demand - ANSWER-- Correct answer ______________ measures the wealth and resources of a particular area or region as well as production and consumption. Supply and demand Interest rates Economy Finance - ANSWER-Economy Loan amount is $765,000. Down Payment is $85,000. LTV is 90%. Interest rate is 4.5%. Using an actual year, calculate the dollar amount of 2.5 points. $1912.50 $2125.00 $19125.00 $21250.00 - ANSWER-$19125.00 The U.S. Mint is a part of the: Department of Treasury Federal Reserve A stand-alone agency FNMA - ANSWER-Department of Treasury The ____________ was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. FDIC Federal Reserve Department of Treasury U.S. Mint - ANSWER-FDIC The ______________ fulfills its role in housing finance by providing members with access to reliable, economical funding and technical assistance, and special affordable housing programs. FHA Federal Home Loan Bank System Secondary market Primary market - ANSWER-Federal Home Loan Bank System The NATIONAL HOUSING ACT of 1934 created what entity to relieve unemployment and stimulate the release of private credit? VA USDA FNMA FHA - ANSWER-FHA RESPA is a ___________ consumer protection statute. TILA HUD FNMA Federal Reserve - ANSWER-HUD Which act is designed to enhance consumer protection by requiring the FDIC, National Credit Union Administration, Board of Governors of the Federal Reserve System and others to jointly develop and maintain a Federal registration system for individual employees of Agency regulated institutions who engage in the business of residential mortgage loan origination? Dodd-Frank CRA Safe APA - ANSWER-Safe Which law requires federal agencies who make rule to have a 30 day delayed effective date? Dodd-Frank Safe Administration Procedures Act Consumer Financial Protection Act - ANSWER-Administration Procedures Act Which act was passed in 2010 in an attempt to create accountability by regulating mortgage lenders and mortgage brokers? Dodd-Frank SAFE Administration Procedures Act Consumer Financial Protection Act - ANSWER-Dodd-Frank Bryan and Carla have located a home they wish to purchase. They have been told that the monthly payment will be $1780. If their monthly long term debt is $630 and the qualifying ratios are 28%/36%, how much monthly income must they have to qualify $3194.44 $4944.44 $6357.14 $6694.44 - ANSWER-$6694.44 Which of the following are NOT a part of the secondary money market? Fannie Mae Sallie Mae Banks Freddie Mac - ANSWER-Sallie Mae Name the entity that is a publicly trade, federally chartered corporation who purchases newly originated and seasoned agricultural loans from lenders. REIT Frannie Mae Ginnie Mae Farmer Mac - ANSWER-Farmer Mac A __________ gives a creditor the right to seize or take your property if you are unable to keep up with payments. Encumbrance Lien Deed of Trust Note - ANSWER-Lien What is the term for a written promise to pay a certain sum of money at a future time? Lien Deed of Trust Note Mortgage - ANSWER-Note Which of the following is NOT included in the note? Seller's name Interest rate Term Late charge amount - ANSWER-Seller's name When does title change with contract for deed? When the buyer has completed the terms of the contract At closing When the contract is executed Upon funding - ANSWER-When the buyer has completed the terms of the contract ___________ financing implies that the debt ranks behind the first secured lender. Subordinate Junior Secondary Private - ANSWER-Subordinate A provision in a mortgage contract that allows the seller of a home to pass responsibility to the buyer of the home for the existing mortgage. Alienation Clause Due-on-sale Clause Subordination Clause Assumption Clause - ANSWER-Assumption Clause This clause insures that the borrower shall not "sell, transfer, encumber, assign, convey or in any manner dispose of the collateralized property or any part there of without the expressed written consent from the lender. Subordination clause Due-on-sale clause Alienation clause Assumption clause - ANSWER-Due-on-sale clause Sales price $175,000. LTV is 85%. Interest rate is 4.75%. Term is 30 years. Closing date is August 20th. Using a calender year, calculate the amount of interest paid the first full month $501.03 $232.29 $588.80 $692.71 - ANSWER-$588.80 The borrower agrees with the lender for a certain amount of money to build the improvements. What kind of mortgage does he have? Blanket mortgage Package mortgage Construction mortgage New home mortgage - ANSWER-Construction mortgage The lender and borrower agree to adjust the interest rate periodically to a new interest rate based on a predetermined index in the economy. This is a ____________ mortgage. Variable mortgage Adjustable rate mortgage Floating mortgage Does not exist - ANSWER-Adjustable rate mortgage Mortgage insurance is typically required when the LTV is greater than ___________%. 75% 80% 85% 90% - ANSWER-80% Lending institutions often change interest on ______________ at a rate that is higher than a conventional mortgage in order to compensate for carrying more risk. Predatory mortgages FICO mortgages Participation mortgages Subprime mortgages Next question - ANSWER-Subprime mortgages Which of the following is not allowed under FHA loans? Vacation home Condominium Manufactured home Buy land and build a home - ANSWER-Vacation home If the borrower has a previous foreclosure, can he use FHA to purchase a new home? No Yes, anytime Yes, after a 3 year wait with clean credit Yes, after a 1 year wait with clean credit - ANSWER-Yes, after a 3 year wait with clean credit The purpose of __________ is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA RESPA SAFE HUD-1 - ANSWER-