Finance Practice exam 5

Remy's mortgage payment is $1.256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?

$1,129.53 Annual taxes ($809) and insurance ($712) are divided by 12 ($1,521 ÷ 12) to get the monthly amount for these items ($126.75), and this is subtracted from the total payment ($1,256.28) to get the principal and interest portion.

How many members are on the FOMC?

12

Which range of credit scores do most consumers fall into?

670 to 739

Which of the following falls under the definition of 'dwelling' according to Senate Bill 36?

A mobile home

The ______ was enaced in 1946 in response to the creation of several new federal agencies.

Administrative Procedure Act

Which act was also known as "the stimulus package" and sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending.

American Recovery and Reinvestment Act of 2009 (ARRA)

How should you analyze data obtained from tracking your personal spending?

Assign categories to all items and look for trends.

Andy is selling his home to Erika and Doug, who are using an FHA loan for the purchase. To facilitate the purchase, Andy can agree to pay ______.

Discount points to buy down Erika and Doug's interest rate

Rick finds that some of his ongoing expenses as a licensee are paid monthly, some quarterly, and some annually. How can he arrive at a standard monthly figure that will help him manage his cash flow?

Estimate total annual expenses and divide by 12 for a monthly amount.

Which of the following contributed to the 2007 financial crisis?

Falling home prices

Why did investors purchase CMOs prior to the 2007 financial crisis?

Housing price appreciation appeared to be a sure thing.

What makes the promissory note's date important?

It determines lien priority

During which phase of the real estate cycle do residents consume local amenities and services?

Living

Which of the following loan types can be packaged into a mortgage-backed security eligible for guarantee by Ginnie Mae?

Loans insured or guaranteed by U.S. government agencies

Betty is purchasing a home and has received Loan Estimates from three lenders. As she compares the terms of the loans being offered, where can she find the section that allows her to make comparisons between loans with different interest rates?

Page three

Information about how the lender will handle assumptions and late payments is included on ______ of the Loan Estimate.

Page three

Which of the following is a piece of general data an appraiser may gather?

Population size

Which type of mortgage is seller financing in which the buyer gives a mortgage to the seller toward the purchase price? Buyers use this as down payment financing.

Purchase money mortgage

Which of the following taxes apply while an investor holds an investment property?

Rental income

A loan made from a homeowner's equity where funds are drawn over tme and the bank gains corresponding property ownership is called a ______.

Reverse annuity mortgage

The section on the Loan Estimate called "Services You Cannot Shop For" includes fees for ______.

Services performed by a third party that the lender selects

Travis has made the final payment on his loan according to the loan terms. What must the note holder do to acknowledge that the debt has been repaid?

Sign the note, mark it "Paid in Full," and return it to Travis

When a buyer takes over payments on a loan without telling the lender, this is called a purchase _____________.

Subject to existing financing

Which act exempted homeowners from paying taxes on capital gains up to a specified value?

Taxpayer Relief Act of 1997

Sylvia is shopping for a mortgage. Because she's a veteran, she compares the VA home loan with the 3.5% down FHA mortgage. If she has only $5,000 available in cash, with all else being equal, which loan will allow her to spend more on a home?

The VA loan

With an interest-only loan, what happens after the specific period of time that interest-only payments are made is over?

The full principal of the loan is due.

The FHA has helped to significantly improve the mortgage market through ______.

The introduction of the long-term amortized loan

As part of a good financial plan, a business checking account is ______.

The proper place to deposit your commission check

In a judicial foreclosure, how long does the borrower's redemption period last if a deficiency judgment isn't being sought?

There is no redemption period

The house payment Tim and Vickie are considering would give them a housing ratio of 34% and a total debt obligation of 40%. Their credit score is 640. What do they need to change to meet the underwriting requirements for an FHA loan?

They should look for a home in a lower price range.

Kendra has applied for a mortgage from Acme Savings and Loan. When is Acme Savings and Loan required to provide Kendra with a Loan Estimate?

Three business days

The FHA offers a program for loan insurance on adjustable rate mortgages under ______ of the National Housing Act.

Title II

What is the trustee's role when a deed of trust is used to secure property for a loan?

To hold legal title to the property on behalf of the beneficiary until the loan is repaid

There are a lot more sellers than buyers in the current market. How will this demand influence value?

Value will be pushed downward. More sellers than buyers = low demand = downward pressure on value.

Celeste hopes to qualify for an FHA loan. She calculates her housing ratio as 31%, and her total debt obligation as 42%. Her credit score is 580. Does she qualify under FHA underwriting guidelines?

Yes

You attend a business-related conference that includes an overnight stay away from home. Can you deduct the cost of your meals during the conference?

Yes, you can deduct 50% of the cost of your meals

How you determine debt coverage ratio?

You divide net income by debt service.

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a 1% loan origination fee. How much is the loan origination fee?

$3,200

You're estimating your annual income and find that the average sale price of a home in the area you'll be working is $300,000. You determine your expected commission is 2%, and you plan to make six transactions in the year. Assume there is no broker's split. What will your estimated income for the year be?

$36,000 $300,000 x .02 = $6,000 per transaction, multiplied by six transactions = $36,000. Question 62 of 150

Remy's mortgage payment is $1.256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?

($1,521 ÷ 12)= $1,129.53

A buyer anticipates a house payment of $1,000 per month, with monthly homeowner association fees of $150. The buyer also has a car payment of $400 per month. If the buyer earns a monthly gross income of $5,000, what is the total debt ratio?

31%

In a deed of trust, who is the trustee?

A neutral third party

A ______ is often used in commercial applications when two or more properties are pledged as security for repayment of the loan.

Blanket mortgage

Cheyenne is selling the family farm on an installment contract. The buyer made payments dutifully for five years, but has not made any payments for more than a year. Which of the following is true?

Cheyenne can keep all of the proceeds received and repossess the property.

A loan to purchase which of the following property types is NOT eligible for purchase by Fannie Mae?

Commercial space Fannie Mae generally focuses on loans used to purchase or refinance a residential property.

Cassie is helping her buyer client, Gus. As they discuss preparations for closing, she cautions Gus, "Make sure you review the Closing Disclosure as soon as you receive it and ______."

Contact your lender immediately if you find errors or have any questions

Which real estate finance instrument includes the promise to repay and the security instrument within the same document?

Contract for deed

Which of the following is an example of a government-sponsored enterprise (GSE)?

Fannie Mae

The rate at which a bank can obtain an overnight loan from another bank without providing collateral is called ______.

Federal funds rate

Brenda's go-to financial expert has no fiduciary responsibility to her. This is because she's working with a(n) ______.

Financial advisor

Which of the following best describes the state of the market during the recovery phase of the real estate cycle?

High but stabilized unemployment and a high number of foreclosures

Brittany is a real estate licensee with a mortgage loan originator endorsement. When she acts as an MLO, the California Real Property Loan Law requires her to give her clients a disclosure that ______.

Informs the prospective borrower about the terms of the loan being offered

Only ______ is paid until the end of a straight mortgage loan term, when the principal is repaid in full.

Interest

In California, how has state law modified the way the deed of trust works?

It creates a lien on the property, and the borrower, not the trustee, holds legal title.

What's the advantage of using separate savings accounts for each financial goal?

It helps you see progress toward savings goals.

What's the purpose of the Equal Credit Opportunity Act?

It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status.

What could be a consequence if there were no secondary mortgage market?

Lenders might not have funds available to make new loans to the public.

When an adjustable rate mortgage (ARM) makes its initial adjustment, it does so to its fully indexed rate. What makes up the fully indexed rate?

Margin plus index

Veterans who wish to use the Native American Direct Loan must ______ and their tribe must have a valid agreement with the VA to offer the program.

Meet the same eligibility criteria as for the VA guaranteed loan progress

Your buyer, Chet, is a veteran trying to buy a house, but the certificate of reasonable value came in $10,000 lower than the agreed-upon sales price. What can Chet do?

Negotiate with the seller

Conventional loans that are outside Fannie Mae or Freddie Mac guidelines are said to be ______.

Non-conforming

This HUD program is responsible for developing and enforcing federal fair housing policies and laws.

Office of Fair Housing and Equal Opportunity

HUD's ______ has a goal of increasing the availability of safe and affordable housing to Native American families.

Office of Native American Programs

How long should you track your spending in order to analyze your spending habits?

One Month

Stacy is opening three savings accounts as part of her personal financial plan. What would be a recommended option for finding low fees and higher interest rates?

Online banks

Carla is a licensee who manages her money with a personal financial plan. When she receives two large commission checks in a row, her personal checking account is holding three months' worth of living expenses. What should she do?

Open a living expenses savings account and move the two-month excess into it.

In which type of partnership is the lender a partner as well as the financier?

Partnership between mortgagees and mortgagors

Rhoda is a first-time homebuyer. She has applied for a VA loan to buy a house from Phyllis. When the CRV values the home at less than the sale price, Phyllis refuses to come down on the sale price, so Rhoda must either ______ or find a different home to buy.

Pay the difference between CRV and sale price in cash

When using a personal finance system with multiple bank accounts, which account should be electronically linked to all of your other accounts?

Personal checking

Which of the following can a lender do if a borrower fails to keep homeowners insurance on the collateral property?

Place lender-acquired insurance on the property and bill the borrower

Connie and John Fink, a married couple ages 69 and 72 respectively, want to stay in their home. The type of mortgage they're considering will allow the lender to make payments to the Finks for a certain period of time, while the lender gains corresponding ownership. Which type of mortgage are they considering?

RAM

Which clause in the deed of trust is the equivalent of the defeasance clause in the mortgage?

Reconveyance

When using a financial system, what activities should you complete on a weekly basis?

Record purchases and file receipts

Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?

Reduce lender risk by establishing borrower qualification standards

Jackson holds a real estate broker license with an MLO endorsement. When he renews his MLO endorsement, what does he need to submit to the NMLS?

Renewal fee

Natalie is a licensee who assists buyers in the purchase of HUD ______ when they're listed for sale.

Repossessed homes

More than 70% of the assets of mutual savings banks is derived from ______.

Savings account

Which of these is a required component of a successful system for your personal finances?

Schedule regular time with your finances.

The Addams family has an FHA-insured loan. The family's mortgage payment has a fixed interest rate, but after the first five years, the rate will adjust annually. Which FHA loan insurance program are they using?

Section 251

When the Treasury collects fewer funds than what is needed to pay the government's bills, what action might it take?

Sell securities

Which of the following will be issued only if title is acceptable and an attorney provides a certificate of title opinion?

Title insurance policy

Seth is purchasing a vacant piece of land, on which he'll build a new single-family home for him and his family. According to Senate Bill 36, what type of loan is this?

Residential mortgage loan

The two most common methods used when a bank fails are the payout method and the ______ method.

Purchase and assumption