Missed and Guessed Q's from Real Estate Finance

The VA loan program offers a basic entitlement amount of ______.

$36,000 The basic entitlement is $36,000, which would allow a veteran to purchase a home priced at $144,000.

How are account numbers displayed in a credit report?

Accounts numbers are truncated for security purposes.

Because the buyer traditionally pays for this, page three of the Loan Estimate includes information about a consumer's right to receive a copy of the ______ from the lender.

Appraisal

Which of the following is NOT required to transfer ownership of a note?

Assignment of the note to the new owner Notes are endorsed, security instruments are assigned.

Which of these individuals may benefit from USDA Rural Development program offerings?

Community-managed lenders

In which type of partnership is there is more than one mortgagor as owner?

Partnership among mortgagors

The FHA Energy Efficient Mortgage allows modifications such as solar panels as long as ______.

The cost of the modification is within limits based on the value of the home

Jasmine has a mortgage on her property, but allows her homeowner's insurance to lapse. Which of these is a possible consequence of this action?

The lender can put Jasmine's loan in default.

Ken and Sue are purchasing a home but are short on the down payment required by their lender. Sue's mother offered to give them cash to help with the down payment. How much can Sue's mother give under current tax laws?

$30,000 Sue's mother can give $15,000 to Ken and another $15,000 to Sue. This is a tax-free gift from Sue's mother. Sue's mother and father could each gift $15,000 to both Ken and Sue, for a total of $60,000.

Regional State Bank has made a lot of loans to consumers in the community and is running low on funds. It seeks a loan from the Federal Home Loan Bank. This loan is called a(n) ______.

Advance FHLB lends money, called advances, to member banks in exchange for collateral.

Which act, which was the first act passed to address the subprime mortgage crisis and was also known as "the stimulus package," 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)

Who or what entity directs the activities of credit unions?

Board of directors

An industrial development bond is a variety of ______ bond.

Municipal An industrial development bond is a variety of municipal bond. They give private investors an opportunity to take advantage of tax-exempt funds in exchange for helping to fund municipal projects, such as apartment buildings.

What are the main benefits to veterans of the VA-guaranteed loan program?

No down payment, no mortgage insurance, and no prepayment penalty

Trixie purchased her one-bedroom beach cottage in 1992 with an FHA loan. Now she's selling it, and the buyer wants to assume her loan. The buyer intends to rent the cottage to vacationers. Will the FHA allow this buyer to assume Trixie's loan?

No, investors aren't allowed to assume FHA loans; the property must be owner-occupied

The FHA is part of ______.

The Department of Housing and Urban Development

Client Bette asked licensee Frank about a home equity line of credit versus home equity loan. Which of the following offers an brief overview of what a home equity line of credit is?

A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest.

Vantagestar Ltd. would like to construct a high-end condominium complex. Where will they likely go for financing this project?

A life insurance company

Robin has great credit and was able to secure a loan for her ocean-side dream home. Her 30-year, fixed-rate loan is for an amount that's above conventional loan limits. What type of loan does Robin have?

A non-conforming loan Loans that are outside of Freddie Mac and Fannie Mae guidelines, such as jumbo loans, are non-conforming loans.

As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.

Blanket lien

Which of the following VA programs requires a credit check, new appraisal, and income verification?

Cash Out Refinance Only the IRRC and Cash Out Refinance are actual VA loan programs; the Cash Out Refinance program requires a credit check, new appraisal and income verification.

The ______ tells the lender how much entitlement the veteran has available under the VA loan program.

Certificate of eligibility The "E" in "COE" is Eligibility, not Entitlement!

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?

Closing costs aren't considered a seller concession. If the seller pays the buyer's closing costs, other than prepaid items or the funding fee, it isn't counted as seller concessions.

Which of the following is NOT part of the assumptions section of the Loan Estimate?

Comparisons

Which entity sets the requirements for qualified mortgages?

Consumer Financial Protection Bureau

Bella is a lender. Joshua is the loan applicant. They both complete their part of the request for verification of the deposit form. The last party to complete the deposit form will be the _______.

Depository institution

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 When buyers use an FHA loan, the seller is allowed to pay for a buydown to lower the buyer's mortgage interest rate.

A second mortgage on property secured by a VA loan is acceptable under certain conditions, one of which is that the first and second mortgage liens ______.

Don't exceed the CRV

What information does Schedule B-2 of a title commitment provide?

Exceptions and flaws that the title insurance policy will not cover

Which of the following is one a way a loan may be modified when a borrower is having difficulty making payments?

Extend the amortization schedule.

Which of the following is a cooperative?

FHLB

Which entity regulates government-sponsored enterprises?

Federal Housing Finance Agency

Robbie's lender notified him of an impending foreclosure, and told Robbie that his property will be sold at public auction. After the auction occurred, he receives a notice of eviction for which the lender had to petition a court. What does this describe?

Foreclosure by advertisement

Which of the following entities commonly acts in the secondary market?

Freddie Mac

Which of the following might involve old wiring or plumbing?

Functional obsolescence

What do loans create for banks and other financiers?

Future cash income

Kobi, an appraiser, is appraising a single-family home used for a rental. If he wants to use the income approach, he will likely use ______.

GRM

Jerry is appraising a five-bedroom home in the suburbs. After identifying the purpose of the appraisal leads, what does he need to do next?

Identify what data is needed

In the early years of a mortgage loan term, which portion of the payment is likely to be the largest?

Interest

With a straight mortgage, what type of payments are made up until the end of the loan term?

Interest

Veterans using the ______ program aren't required to submit a COE, get a new appraisal, or verify income.

Interest Rate Reduction Refinance The VA's Interest Rate Reduction Refinance is similar to the FHA streamline refinance program.

Lucas would like to be a homeowner, but his low credit score makes lenders unwilling to give him a mortgage. What makes the 203(b) loan a more likely option for Lucas to qualify for a mortgage?

It has less stringent qualifying requirements than a conventional loan.

Which of the following best describes the non-judicial foreclosure process?

It may be used if the deed of trust includes a power-of-sale clause.

The CFPB uses education to accomplish its mission, such as the ______ publications.

Know Before You Owe

The loan applicant, the employer, and the ______ all complete parts of the request for verification of employment form.

Lender

Which of these would most likely be found in the "potentially negative items" section of a credit report?

Lien

Martha and Ben are selling their home to Linda and her three kids. They've purchased title insurance for obtaining insurance of good title. Whom does the title insurance protect?

Linda and her kids Title insurance is required when financing is being obtained. The owner's policy protects the buyer from defects in the title.

Life insurance companies are more concerned with long-term stability of investments than they are ___________.

Liquidity

Which type of real estate investment trust involves both residential and commercial properties?

Mortgage REIT

Which type of real estate investment trust derives a portion of its income from interest dividends?

Mortgage REIT Mortgage REITs are often owners of real estate mortgage trusts (REMT) and derive a portion of their income from interest dividends.

Under the "Projected Payments" section of the Loan Estimate, the consumer can view what is included in the monthly payment. Which of the following may be part of the total payment other than the principal and interest?

Mortgage insurance

Maxine is purchasing a small craft shop, including the underlying real estate. She applies for a commercial loan from her federally insured bank to complete the purchase. Is Maxine's transaction covered by the Real Estate Settlement Procedures Act?

No; commercial and business loans are exempt from RESPA requirements.

An intermediate-term security issued by the Treasury that has a maturity term of between two and 10 years is called a Treasury ______.

Note

Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?

Note with deed of trust

Conforming loan limits vary based on location and ______.

Number of units being purchased with the property

What's the definition of a qualified mortgage?

One that meets stringent CFPB guidelines

What type of partnership is a cooperative?

Partnership between mortgagors A cooperative is a partnership between mortgagors, and operates as a corporation. Cooperatives usually purchase multi-unit buildings, such as apartments.

The two most common insolvency methods put in place when a bank fails are the purchase and assumption method and the ______ method.

Payout

Leslie has applied for a loan modification. As part of the process, her lender will likely ______.

Perform a title search

Which of the following best describes foreclosure by writ of entry?

Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed

Which of these describes the Texas Mortgage Credit Certificate program?

Provides eligible homeowners the opportunity to reduce their federal tax liability The Texas Mortgage Credit program seeks to improve affordability by offering qualified homeowners the opportunity to receive a dollar-for-dollar reduction in their federal taxes owed for the amount they pay in mortgage interest.

Which of these describes the Texas Statewide Homebuyer Education Program?

Provides information and counseling resources to those purchasing a home

Which of the following resources are extremely helpful when working with investors?

REIT analysts and bond rating agencies

What factors directly affect an adjustable rate mortgage?

Rate, index, and margin

In which phase of the real estate market cycle would you expect to see property under valued and a large supply of homes on the market?

Recovery

Annual MIP can be removed from an FHA loan by ______.

Refinancing to a conventional loan The annual MIP is paid for the life of the FHA loan and may only be removed by paying off the loan, by selling the home, or by refinancing to a conventional loan.

A lender qualifies a borrower for a VA loan based on ______.

Residual income and debt-to-income

What term is used to describe the housing inventory in default or foreclosure?

Shadow inventory

Which of the following would the FDIC most likely not insure?

Stock certificates The FDIC insures deposits such as checking/savings accounts, money market accounts, and certificates of deposit. The FDIC does not insure mutual funds, securities, stocks, bonds, insurance, or annuity products.

The Mortgage Disclosure Improvement Act amends ______ in terms of the timing of lender disclosures.

TILA

Which of the following assumptions does the Torrens system make?

That any issues that arose in the previous title search have been resolved A Torrens search goes back to just the last search. This approach operates under the assumption that the last search was done appropriately, accurately, and legally, and that any issues that arose were resolved.

Which of the following statements is true about the MIP on an FHA loan?

The FHA may adjust the percentage used to calculate MIP on FHA loans.

Which agency regulates FHLBanks?

The Federal Housing Finance Authority

The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.

The borrower Only the borrower, as maker of the promise, is required to sign the note.

The appraiser of Garran's property used the Torrens system to perform a title search. Now a claim has been filed. Who or which entity will be the title guarantor?

The state The state will serve as the guarantor if there is a claim.

Page four of the Closing Disclosure includes consumer education about ______.

The use of an escrow account

Mutual savings banks prefer to keep their lending activities in their immediate geographic area. Why?

They prefer to personally monitor the loans they issue. Mutual savings banks prefer to keep their mortgage lending in the immediate geographic area (think East Coast) so they can closely monitor the loans.

Sophia and Antonio are expecting twins. They want to sell their old house and buy a larger home using a conventional loan. In order to be sure they'll get the PMI waived, what will they need to have?

They should have a loan-to-value ratio of 80% or less.

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

The FHA Section 203(h) program assists ______ with an insured mortgage.

Victims of a presidentially declared disaster

Bob is selling a four-bedroom house that he bought as an investment property. Victoria would like to buy it, but she has a low credit rating and can't find a bank that will offer her a loan. After reviewing Victoria's financial situation, Bob feels confident that she's an acceptable risk. He offers to extend her a line of credit for the purchase in the form of a contract for deed. What issue should Bob be aware of?

Victoria could cause an involuntary lien to be placed on the property.

A lender and a borrower sign a mortgage agreement, placing a(n) ______ lien against the borrower's home.

Voluntary and specific

A lapse in property insurance coverage can result in borrower default because it leaves the lender ______ should something happen to damage the property.

Vulnerable

The American Recovery and Reinvestment Act provided mortgage assistance to ______.

Wounded servicemen and servicewomen

Nadia uses a VA loan to buy a house for $125,000. She wants to buy the neighboring property, an empty lot, so she can improve the house using the extra land. The lot is for sale for $135,000. Can she use a VA loan for this purchase?

Yes, she should have partial entitlement left. Nadia's first loan was not large enough to use even the entire basic entitlement, so she has sufficient entitlement left to qualify for another VA loan, as long as she can afford the payments.

In addition to itemizing all borrower-paid and seller-paid closing costs, page two of the Closing Disclosure also tells the borrower when each amount is paid by listing it under ______.

"At closing" or "before closing"

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?

$210,000, the sales price The VA will guarantee a loan amount up to the lesser of the CRV or the sales price. In this case, the sales price is less, so the loan guarantee will be based on that.

Up to what amount will the FDIC insure?

$250,000

Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?

$80,000 The VA guarantees up to a quarter of the total loan amount, up to $104,250, so Millie and Jerry's loan is guaranteed for one-fourth of $320,000, which is $80,000.

What is the formula for calculating the total debt ratio?

(Monthly debt payments ÷ gross monthly income) × 100

What must a qualified mortgage's loan term limit be?

30 years or less

Margo, a mother of three, is in the largest percentage of consumers with a score of _______. Margot's tried unsuccessfully to get approved for loans, but she was issued a credit card that included many extra fees and required deposits.

679 or lower

Consumers in the _______ range have an above-average credit score. They tend to qualify for better interest rates than those in the "acceptable" category.

740-799

What's the most common ratio for borrowers who use split, or piggyback, mortgages?

80/10/10 A common ratio for this type of loan is 80/10/10. This means the first mortgage is 80%, the second is 10%, and the borrower's down payment is 10%.

Consumers in the _______ range are well above the average credit score and generally have an easy time getting approved for new credit.

800+

Which of the following is true about a home equity line of credit?

A borrower can use the funds as needed, repay them, and borrow them again.

Which of the following is Fannie Mae most likely to purchase?

A conventional fixed-rate mortgage issued by a commercial bank Fannie Mae primarily purchases conventional loans from commercial banks.

How does the FHA control the use of 203(k) money loaned for repairs to a home?

A cost estimate must be provided prior to loan approval, and repairs are approved by an FHA inspector when completed.

What is the HECM program?

A form of reverse mortgage insured by the FHA

By stabilizing and improving the mortgage market, the FHA helped to build ______.

A global market for mortgage-backed securities

What's a participation certificate?

A mortgage-backed security issued by Freddie Mac Participation certificates are what Freddie Mac calls their mortgage-backed securities.

In a deed of trust, who is the trustee?

A neutral third party The trustee is the one who holds the trust on behalf of the beneficiary (the lender).

Which of these statements about a buydown is true?

A permanent buydown will cost more than a temporary buydown.

Which of the following is a true statement about the use of a promissory note?

A promissory note is a legal instrument that's similar in nature to a contract.

What type of property is Aileen appraising if she's using the income approach?

A short-term lake rental

What is the Torrens system?

A title search method that goes back as far as the previous title search The Torrens system is a title search method that goes back only as far as when the last title search was performed. This method assumes the last search was accurate and any issues that arose were resolved.

Which of the following types of properties may be eligible for purchase by Freddie Mac?

A triplex purchased as a primary residence

Larry is a lender processing a loan application. Which of the following might he request to verify the applicant's bank deposit information?

Account statement

Which of the following may a lender request to verify an applicant's bank deposit information?

Account statement

Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.

Alienation

Albert wants to sell his house to his cousin, who's willing to assume his FHA loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?

Alienation clause

Assuming a CMO uses the sequential pay structure, how is interest passed through from borrowers paid to investors?

All tranches receive interest payments.

Which act made some mortgage insurance premium deductions available to certain taxpayers?

American Taxpayer Relief Act of 2012

Under the "Summaries of Transaction" section on page three of the Closing Disclosure, amounts listed for the borrower's transaction are calculated to result in ______.

An amount due from the borrower, which will match the cash to close amount

The energy efficient mortgage program insured by the FHA requires an energy consultant to provide the lender with a report listing recommended modifications for energy efficiency, an estimate of the cost for each recommendation, and ______.

An estimate of the energy savings that would result

For borrowers who already have an FHA loan, the Streamline Refinance program offers the benefit of ______.

An unlimited loan-to-value ratio

FHA may adjust loan limits for each county ______.

Annually

Who needs to obtain a mortgage loan originator endorsement and register with the Nationwide Mortgage Licensing System and Registry?

Anyone who acts as a mortgage loan originator

Which of the following is an example of an inquiry a consumer initiated that may appear on a credit report?

Application for a loan

When a promissory note is sold, what is recorded in county land records?

Assignment of the security instrument the note is attached to

______ is a legal action that liquidates or restructures debt. It can have a long-lasting negative impact on the borrower's ability to obtain financing.

Bankruptcy

Which of the following is a likely effect when the discount window is closed?

Banks don't have access to additional funds.

Chapo's property was foreclosed on and he is facing a deficiency judgment so the lender can recover losses incurred from the foreclosure process. What type of lien may the lender levy against Chapo until the losses are paid?

Blanket lien

Completing a residential loan application requires providing information about the loan being requested, the property being purchased, and the ________.

Borrower purchasing the property

Which of the following statements about liens is true?

Both mechanic's and materialman's liens are junior liens.

In which U.S. market(s) do foreign lenders participate?

Both the primary and secondary mortgage markets

Robert is a rancher. He was told about the USDA Farm Service Agency offerings. What can he use an approved loan for?

Building a new hay barn

A lender requires a title search to finance a transaction. Who pays for this search?

Buyer The buyer incurs loan-related closing costs before, during, and after closing. These include fees for things like loan origination, loan application, underwriting, appraisal, credit report, title search, and title insurance.

How does the consumer provide economic support to a community in the living phase of the real estate cycle?

By purchasing and consuming local goods and services

What is one way that the FHA has helped to stabilize and improve the mortgage market?

By requiring appraisers to be state licensed or certified to evaluate property for FHA-insured loans

Under which section of the Loan Estimate will you find any credits provided by the seller?

Calculated Cash to Close

Kaycie is a new employee at a mutual savings bank. During orientation, she learned that mutual savings banks have limitations that are set by their ______.

Charter

Which of these items is a demand deposit?

Checking account

When obtaining a mortgage to purchase a home, for what does the borrower use the property?

Collateral

When Fannie Mae purchases a loan, they pay the loan originator a(n) ______ fee.

Collection Fannie Mae pays a collection fee, which can be a significant source of income for loan originators.

Which of the following items directly influences real estate supply?

Construction

When a buyer obtains an FHA loan, the seller may ______.

Contribute up to 6% of the sales price (or appraisal, if that's lower) to the buyer's closing costs

The Baxters are looking at a $425,000 home. They have $90,000 in savings to use as a down payment. What loan type(s) would likely be the best option for them?

Conventional

Which of the following loans may require compliance with Appraiser Independence Requirements?

Conventional AIR may apply to conventional loans used to purchase a single-family dwelling of one to four units. Federally insured or guaranteed loans (such as FHA or VA or commercial loans) are exempt.

Which of the following entities has the authority to place an equitable lien on a property?

Court order by judge

Interest-only loans are a form of ______ buyer financing.

Creative

Payment history, age of accounts, inquiries, types of accounts, and _______ are factors considered in calculating a credit score.

Credit usage

In an amortized loan, the interest portion of the mortgage payment generally ______ over the life of the loan.

Decreases The interest portion of the payment generally decreases over the life of the mortgage loan as the principal portion increases.

Which of the following is a form of commercial bank revenue related to mortgage financing?

Demand deposits

With a VA loan, the certificate of reasonable value is used to ______.

Determine the value of the loan that the VA will guarantee

The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral is called the ______ rate.

Discount

The ______ was enacted in 2010 to create stricter regulation of the financial services industry to reduce costs for consumers from (for instance), undisclosed kickbacks.

Dodd-Frank Wall Street Reform and Consumer Protection Act

Percy is buying a home with an FHA loan. He uses the ______ to borrow enough money to cover the cost of replacing most of the windows in the home, which will improve its energy usage by 15%.

Energy Efficient Mortgage

The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.

Exculpatory

Chapter 5 of the Texas Property Code set requirements and penalties for ______.

Executory contracts

Which banking-related entity shares similarities with the purpose and function of the NCUA?

FDIC

When George is working with buyers who can't afford a large down payment, he recommends that they look into ______.

FHA financing

Commander Halfback retires after 25 years of service in the Coast Guard. He is looking to buy a home. What type of loan should he use?

FHA, VA, or conventional

A homeowner may go into default on a home loan due to ______.

Failure to meet loan terms and conditions

On an FHA 203(k) loan, the combined cost of home value and rehab must ______.

Fall within the FHA mortgage limit for the area where the property is located.

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

Fannie Mae

If Acme Bank, a primary lender, wants to sell its loans on the secondary market, it would be easier for it to do so if its loans meet ______.

Fannie Mae and Freddie Mac guidelines

What entities make up the secondary mortgage market?

Fannie Mae, Ginnie Mae, Freddie Mac, Farmer Mac, and lending institutions that buy loans from other lenders

The ______ is a government-sponsored enterprise that works through a cooperative system to provide agricultural and rural loans.

Farm Credit System

Which entity provides disclosures and public information about the financial condition of FCS?

Federal Farm Credit Banks Funding Corporation

When establishing guidelines for conforming loans, Fannie Mae and Freddie Mac use loan limits set by which entity?

Federal Home Financing Agency

Which of the following resources will give you reports and statistics including house price index, foreclosures, and refinancing?

Federal Housing Finance Agency

Which government entity oversees open-market operations?

Federal Open Market Committee

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

Federal funds

After purchasing a property, what can Jeremiah do to clear a possible future claim on the property's title?

File a suit to quiet title.

Community Banks is being sued for intentionally violating the Truth In Lending Act. What fines and imprisonment possibilities can the company face?

Fines up to $5,000 and up to a year of imprisonment

The Homeownership Voucher Assistance program is available to ______ to help pay monthly homeownership expenses.

First-time homeowners

When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients?

Have an attorney review the contract.

Veterans who use the VA's Specially Adapted Housing grant must ______.

Have permanent and total service-connected disability

Scott has plenty of money saved and is ready to make a down payment on his $14 million dream home. One problem: Scott doesn't want to end up with a jumbo loan because he goes over the conforming loan limit. What option does Scott have?

He can take out a piggyback loan.

Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?

He will pay 1/12 of it monthly with his mortgage payment.

A seller buydown can ______.

Help a borrower meet lender qualification standards

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?

Her down payment of $50,000 isn't at least 20% of the purchase price.

With this common loan type, the home is used as collateral and the loan creates a second mortgage if the first mortgage hasn't been paid off.

Home equity

The ______ Act was legislation aimed primarily at addressing the effects of the subprime mortgage crisis.

Housing and Economic Recovery

Which of the following can you offer to your low-income buyer clients with a small down payment?

Housing choice vouchers

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

Housing price appreciation appeared to be a sure thing.

Which type of real estate investment trust derives its income from the rent or sale of property and interest dividends?

Hybrid REIT Hybrid REITs are a combination of mortgage lending and equity investing. They derive their income from the rent or sale of property and interest dividends.

Joseph is self-employed and wants to buy his first home. What additional document may he need to provide to the lender when trying to obtain a loan?

IRS Form 4506-T

Kathy decided to borrow funds from her retirement account to fund the down payment on her new house. Which of the following is true about this loan?

If Kathy's loan is through an employer-sponsored pension plan and she loses her job, the loan will become payable immediately. While the loan Kathy takes from her retirement account won't be used in the lender's DTI calculation, she'll have only five years to repay the loan. If the loan is from an employer-sponsored pension plan and she loses her job, the loan comes due immediately. If she's unable to pay it off or if she fails for any other reason to repay the loan, she'll face income tax consequences.

What makes the HECM program safer for borrowers than a traditional reverse mortgage?

If more equity is paid out than remains, the homeowner doesn't have to make up the difference.

Historically, what do property values tend to do over short periods of time?

Increase and decrease

What is the general economic impact of mortgage loan payments?

Increase in economic growth

A lender benefits from selling loans to Fannie Mae by ______.

Increasing capital to offer loans with larger sale prices Lenders increase their incomes by selling loans to Fannie Mae and profiting from the collection fees.

Which of the following are potential private loan resources that may be willing to finance a home?

Individual entrepreneurs

Commercial banks fall into which of the following category of lenders?

Institutional lenders

The Federal Housing Administration's loan program ______.

Insures lenders against loss from borrower default

Which of the following could be different from the amount on the initial Loan Estimate and can impact the monthly payment?

Interest rate

Max has a dog that bit his neighbor. The neighbor sued Max, which resulted in a judgment against him. Max refused to pay the neighbor according to the judgment. The neighbor placed a lien against Max. How is this lien classified?

Involuntary, general

Susan's cat bit and scratched her neighbor, who's suing Susan. The lawsuit resulted in a judgment against her. Susan does not want to pay the neighbor according to the judgment, so the court placed a lien against her property. How is this lien classified?

Involuntary, general

Sean hasn't paid his property tax. The tax collector places a lien on his property. How is this lien classified?

Involuntary, specific

What is the purpose of a lifting clause?

It allows a borrower to refinance a first mortgage without affecting its lien position even when a junior mortgage is in place.

Which of the following best describes a blanket lien?

It gives lenders the ability to recover losses due to a foreclosure sale from any current or future property the borrower owns.

Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?

It increases demonstrated income.

What is the impact to lenders when mortgage packages are sold?

It provides additional cash flow for new loans.

What is the interest rate on a VA loan?

It varies by lender

Which of the following is a true statement about the Hardest Hit Fund?

It was available in the states with the most underwater homeowners.

What did a 2019 National Association of REALTORS® study say about foreign investment in U.S. real estate?

It's less stable than in previous years.

Jamal is active military. His cousin, Piper, is in the National Guard. If they both qualify for a VA loan ______.

Jamal will pay less than Piper for his funding fee.

Joseph's got B-rated credit, and his commercial bank suggested he check with the specialty mortgage company down the street because they deal in subprime loans. What's NOT true about Joseph's situation?

Joseph should avoid taking the commercial bank's advice, since a subprime loan is most likely made by a predatory lender.

Which of the following clauses is included in Fannie Mae's multi-state note?

Late charge

What's the name of the clause in a promissory note where this language appears: "If the Note Holder has not received the full amount of any monthly payment by the end of ______ calendar days after the date it is due, I will pay a late charge to the Note Holder"?

Late charge provision

A seller is offering a second loan to help the buyer with her down payment via a contract for deed. Why might the buyer's lender have an issue with this?

Lenders don't like a contract for deed arrangements. The seller holds legal title in a contract for deed, making foreclosure difficult; therefore, a lender won't approve a contract for deed.

Closing costs are itemized on page two of the Closing Disclosure, and all amounts are ______.

Listed according to who paid them: the borrower, seller, or other

Zara is reviewing the "Calculating Cash to Close" table on page three of the Closing Disclosure to see what has changed from her Loan Estimate. She found this extremely helpful and easy to understand because the table explicitly lists _______.

Loan estimate and final amounts side-by-side

How do mortgage lenders acquire income?

Loan interest and mortgage packages sold on the secondary market

In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market?

Low interest rates and high property values

Maggie has a neighbor, Jim, who is facing foreclosure. She likes Jim and wants to help him out, so they agree to do a "subject to" purchase. What does this mean?

Maggie will take over Jim's loan payments without telling his lender she's doing so.

Which of the following is the best example of the economic principal of leveraging, as it applies to a real estate transaction?

Making a down payment

The interest rate on an FHA Section 251 loan is adjusted based on ______.

Market indices approved by the FHA

Natalie and Sam are reviewing the Loan Estimate form to ensure the date, their names, the property address, and sales price is listed accurately. Additionally, the information provided about their loan term, purpose, product, type, and rate lock should ______.

Match what the lender discussed with both of them

Which of the following is an example of an involuntary, specific, statutory lien?

Materialman's lien

The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be cancelled?

Maybe, but they'll have to petition their lender

FHA county loan limits are based on ______.

Median price for the area and property type

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 program

Which of the following is a true statement about FHLBanks?

Member banks can borrow for up to one year without collateral.

Which act temporarily removed the requirement that taxpayers whose homes were sold as a result of a foreclosure had to include the loan write-off amount as taxable income?

Mortgage Forgiveness Debt Relief Act of 2007

Life insurance companies participate in real estate in the ______ arena.

Mortgage blocks from secondary mortgage market

Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs.

Native Americans living on tribal land

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

Both the Housing and Economic Recovery Act and the American Recovery and Reinvestment Act funded a program called the ______ program, which provided emergency assistance grants to states to purchase and redevelop foreclosed and abandoned homes and residential properties.

Neighborhood Stabilization

What piece of information would an appraiser NOT find in the Subject and Contract sections of the report?

Neighborhood characteristics

A refinance is always a ______.

New loan

Which is one of the benefits of the USDA loan program?

No down payment is required.

Jackie is 10 days late on her loan payment. Will her lender likely place her loan in default?

No, she needs to be 30 days late to be in default. Lenders usually charge a late fee if payment isn't received within 15 days of its due date; after 30 days, the loan may go into default.

Chris and Nick hope to qualify for an FHA loan. Their lender calculates their housing ratio as 33% and their total debt obligation as 43%. Their credit score is 620. Do they qualify under FHA underwriting guidelines?

No, they don't meet the housing ratio requirement.

One common predatory lending practice is to charge fees for unnecessary or ______ loan products or services.

Non-existent

Which of the following is NOT a benefit government-sponsored enterprises receive?

Non-profit status

What percentage of closing costs can be included in a VA loan?

None

Your client, Yolanda, is a nurse. Does she qualify for the Good Neighbor Program?

Not unless she is also an EMT The Good Neighbor Next Door program offers specific FHA-foreclosed properties to owner-occupied individuals who are law enforcement officers, K-12 teachers, firefighters, or EMTs.

A beneficiary, trustor, and trustee are the parties involved when the finance instrument is a ______.

Note with deed of trust

Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?

Note with mortgage, note with deed of trust, or contract for deed

Bo's real estate ad states: "Custom homes for sale with scenic mountain views. Easy financing and low down payments." What else must be included in the ad in order for it to comply with TILA?

Nothing Under TILA, ads that mention general financing terms, such as "low down payment" or "easy financing," do not require additional disclosure. If Bo had gotten more specific (e.g., "10-year loan with 0% down") he would need to include more information.

When a buyer uses an FHA loan, the down payment amount is calculated ______.

On the lesser of the sales price or the appraised value of the property

Chanel is buying a brand new home with a VA loan. She's obtained a certificate of reasonable value. For how long is that CRV valid?

One year

Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications.

Participate in the direct endorsement program

Joe works for a life insurance company that funds commercial investment projects and often insures these projects by insisting on an equity position. What type of financing does this describe?

Participation

Life insurance companies sometimes like to insure their investment in commercial projects by insisting on an equity position. This is known as ______ financing.

Participation Participation financing means the lender becomes a participant in the deal in exchange for some equity. This offers added security for the investment.

In which type of participation agreement would a financier lower the interest on the mortgage in exchange for partial ownership of the project?

Partnership between mortgagees and mortgagors

Which of the following statements is true regarding closing costs on a VA loan?

Payment of closing costs may be negotiated.

In order for the spousal support Kayla receives to be considered in the lender's income evaluation when Kayla applies for a home loan, what must be true?

Payments must have been received for at least one year, and must be expected to continue for at least three more years.

Which of these are established by the Federal Housing Finance Agency?

Percentage targets for loans made to low- to moderate-income borrowers

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

Which of the following best describes foreclosure by entry and possession?

Petition to enter, repossession, notice of eviction

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

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

The ______ clause in a deed of trust allows the lender to foreclose non-judicially.

Power of sale

Which interest rate do banks use to offer consumer loans?

Prime rate

Assuming a CMO uses the sequential pay structure, how is principal passed through from borrowers paid to investors?

Principal payments are only made to the first tranche until it retires, then to the second tranche, and so on.

What information would an appraiser record in the Site section of the Uniform Residential Appraisal Report?

Property dimensions

Residential property owners don't often default on property taxes. Why not?

Property taxes are usually paid with the monthly mortgage payment. Most of the time, the monthly mortgage payment consists of principal, interest, taxes, and insurance (PITI)—so the property taxes are included in that payment.

Which of the following characteristics would the appraiser find in the Neighborhood section of the URAR?

Property value trends

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

Purchase and assumption

How common are interest-only loans today?

Rare Interest-only loans are rare. They were more common before the housing crisis, but because a large number of borrowers defaulted on interest-only loans, they've fallen out of use, and have only recently become available again on a very limited basis. When they're used, the borrower pays only the interest for a specific period of time, usually five to seven years.

Which of these acts has special provisions for borrowers who are victims of over-charging?

Real Estate Settlement Procedures Act

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

Repossessed homes

What information does Schedule B-1 of a title commitment provide?

Requirements that must met before a title policy will be issued Schedule B-1 lists items the title insurance company requires to be addressed before they'll issue the title insurance policy. This may include resolving liens or paying taxes that are due, among other items.

Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?

Reverse annuity mortgage (RAM)

The three-business-day period following the latter of either the date that the transaction is consummated or the date the disclosure is made, during which a borrower can cancel their loan, is called the ______.

Right of rescission

Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ______.

Roll the funding fee into the loan

Gertrude is buying Sam's house, and Sam has agreed to finance the purchase. Gertrude is aware that a seller-financed transaction creates certain risks for her that a conventional loan wouldn't. Which of the following is an issue that Gertrude is protected from via her loan agreement?

Sam could sell the property to another person at any time, canceling Gertrude's equitable interest in the property and her right to possess it.

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

Savings accounts

Which commitment section matches the schedule to its description and provides information related to the transaction, including legal description and parties?

Schedule A

The ______ table discloses the amounts associated with the transaction that the seller will pay and receive, usually resulting in a total cash to seller.

Seller's Transaction

Travis 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.

Which of the following types of residential dwellings do life insurance companies purchase from the secondary mortgage market?

Single-family on one lot

Shania is having work done on the house she just purchased using an FHA 203(k) loan. How much time does the contractor have to complete the work?

Six months

After bonds are ______, their value goes up and down with the market.

Sold

A major component of the Housing and Economic Recovery Act was the HOPE for Homeowners program, which aimed to ______ by helping subprime borrowers refinance into more affordable fixed-rate mortgages.

Stabilize the housing market

Samuel and Yoshi have worked at the same firm for a few months and get along well. Samuel mentions he has a credit score in the low 800s. Yoshi, who's just starting out, persuades Samuel to sign for a loan to help Yoshi buy a property, since his credit isn't good enough. Yoshi promises to make the mortgage payments, but two months after the deal closes, Yoshi moves across the country. Samuel's now stuck with a $400,000 mortgage. What type of scheme is this?

Straw buyer

A lot in a new subdivision is finished and ready to be sold. The developer needs a clear title in order to transfer the property. Which of the following clauses must be included in a loan agreement?

Subordination

When a veteran assumes a VA loan, the ______ agreement can restore the original buyer's level of entitlement as if the loan were repaid in full.

Substitution of entitlement

What is one of the ways the U.S. Treasury promotes economic growth and stability?

Supervises national banks and financial institutions.

What is TRID?

TILA-RESPA Integrated Disclosures

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

Taxpayer Relief Act of 1997

The federal SAFE Act required states to enact licensing and registration requirements related to loan originators, and created the Nationwide Mortgage Licensing System and Registry. Which act was Texas' response to the federal act?

Texas SAFE Act

When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.

That the work meet FHA's basic energy efficiency and structural standards

What is the purpose of the Federal Reserve System?

The Fed regulates the U.S. depository institutions.

Which of the following was created as a result of the Housing and Economic Recovery Act?

The Federal Housing Finance Agency

What agency receives paper currency prior to its distribution but after it's printed?

The Federal Reserve

Which of the following entities support lenders in having adequate cash flow available?

The Federal Reserve and secondary mortgage markets

Maria is a borrower reviewing her Closing Disclosure. She notices that the appraisal fee is listed under "Paid by Others" and has an L listed with the amount. What does this mean?

The L indicates that the creditor pays the item at consummation.

Kendra has applied for a loan from Acme Savings and Loan, but when she compares the Loan Estimate the loan officer gave her with the one from Best Bank, where she also applied for a loan, she decides she'd rather go with the loan from Best Bank. Which of the following is a true statement about this situation?

The Loan Estimate expires in 10 business days if Kendra doesn't tell Acme Savings and Loan that she wants to move forward with it.

What's another name for the Homeowner's Protection Act?

The PMI Act of 1998

Which act establishes general requirements that state agencies must follow when adopting rules or conducting contested cases?

The Texas Administrative Procedures Act

Bart is selling his home and has accepted an offer from a buyer, who's obtaining a VA loan. The sale price is agreed upon and is in the purchase contract. Then Bart receives a call from his agent, explaining that the buyer is hoping that Bart will lower the sale price because ______, and there is a risk the buyer will not be able to get the VA loan as a result.

The VA appraiser completed the CRV and it is less than the sale price

Tom's CRV came in low and he's decided to make up the difference in cash. What else will be required?

The VA may require Tom to prove the source of his funds.

Borrower Max is reviewing his Closing Disclosure to check the amount of prepaid mortgage insurance, taxes, and interest. In addition to itemizing what his borrower-paid closing costs are, the prepaid section includes ______ for each item.

The applicable time period

Which of the following is a true statement about borrower qualification standards for a VA-guaranteed loan?

The applicant must have a certificate of eligibility.

In order for earnings from a second or part-time job to be considered as part of a lender's income evaluation, what must be true?

The applicant must have been employed for at least two years, and the employment must be expected to continue.

Which of the following statements about the Torrens system is true?

The approach is only used in a handful of states.

A multibillion dollar online retail distributor has decided to set up operations in Ashland. The population of Ashland is 22,000. What is the potential impact to the area?

The community is potentially put at risk.

What is the most likely effect when the Fed sells securities on the open market?

The economy may slow down due to a decreased money supply.

The annual MIP is recalculated each year using ______.

The end-of-year loan balance, plus the balance after the next 11 payments

Borrowers Ava and Liam are expecting their first child and want to be sure they're both comfortable with the monthly payments they'll be responsible for in the new house. Under the "Projected Payments" section of their Loan Estimate, Ava and Liam can review ______.

The estimated breakdown of each monthly mortgage payment, including any items that will be included in escrow

Joyce and Danny purchased a home in 2009 for $280,000. They received a homebuyer credit of $8,000. Their friends Margie and Scott purchased a home in 2010 for $320,000. Margie and Scott didn't receive a homebuyer credit. Why not?

The homebuyer credit was part of the stimulus package enacted in 2009 and was only effective between January and December of 2009.

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

The introduction of the long-term amortized loan

Carla and Sven have a previous foreclosure, but now they are a few years away from that. They make good money with their jobs, and have about $30,000 available to use for a down payment and closing costs. Why might they consider an FHA 203(b) loan, even if they have sufficient down payment for a conventional loan?

The lender can consider compensating factors, even if their credit history isn't great.

Who holds the promissory note while it's being repaid?

The payee The lender is the payee who holds the note while it's being repaid. If the note is transferred, the new owner becomes the payee and note holder.

Which of the following is a true statement about when a promissory note is sold?

The promissory note is endorsed to the new owner of the loan.

Which of the following describes the federal funds rate?

The rate at which a bank can obtain a loan from another bank

When a lender has a lien on a property via a mortgage, what rights does the lender hold?

The right to foreclose

The Farm Credit System funds are acquired from ______.

The sale of debt securities and international money markets

Which of the following statements about an assumption is NOT true?

The seller's credit score may improve although he's not making any mortgage payments.

Which one of the following statements is true for a sale that's subject to an existing mortgage lien?

The seller's credit score may improve although he's not making any mortgage payments.

Margot reviewed page three of her Closing Disclosure to see the amounts she'll pay and receive, and the total cash amount. She located this information under the "Summaries of Transaction" in the "Seller's Transaction" table, which is completed by ______.

The settlement agent

When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?

The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.

When does the mortgage insurance requirement end for a borrower with a VA loan?

There is no mortgage insurance requirement for a VA loan.

Tina is applying for a home loan. In order for child support payments she receives to be considered in the income evaluation by her lender, what must be true?

There must be a consistent track record of payment or the payments must be the result of a court order.

Which of the following is true about mortgage brokers?

They don't service the loan beyond placement.

Why are life insurance companies less concerned with liquidity than long term security of an investment?

They prefer financing larger projects, which inherently have more long-term security.

Which of the following statements is true about national lending intuitions?

They sell packaged loans to investors.

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. Although 640 is an acceptable score for an FHA loan, its underwriting requirements specify a housing ratio of no more than 31%. A less-expensive home might help this couple meet the FHA underwriting guidelines for housing ratio.

What is the benefit Ginny Mae investors have over those who invest in other MBSs?

They're able to collect timely principal and interest payments.

Which of the following statements is true about buydowns with a VA loan?

They're allowed only on fixed rate loans. A borrower may buy down the interest rate on a fixed rate VA loan, but buydowns are not allowed on ARMs.

Which of the following statements is true about government loans?

They're insured or guaranteed by a government agency.

When appraiser Archie uses the sales comparison approach, at least how many comparables may be included in the URAR?

Three

How does the VA qualify a property for a VA-guaranteed loan?

Through a VA-approved appraiser

How does the VA fund the mortgage guarantee program so that lenders can be reimbursed for any losses from borrower default?

Through a funding fee charged to most borrowers

Roger is a veteran with a service-connected disability that requires him to use a wheelchair. He is eligible for the VA's Specially Adapted Housing grant. What can he use this grant for?

To remodel a home he owns to accommodate his disability

What program allowed the U.S. Treasury to spend hundreds of billions of dollars to stabilize our financial system, boost credit markets, help families avoid foreclosure, and promote economic growth?

Troubled Asset Relief Program

The ______ requires specific disclosures and was enacted in 1968 as part of the Consumer Credit Protection Act.

Truth in Lending Act

Which of the following has a direct responsibility to pay the nation's bills?

U.S. Treasury

The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation.

USDA Farm Service Agency

To be eligible for a ______, an applicant must have participated in farm or ranch management for at least three years.

USDA loan through the Farm Service Agency

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

Unemployment increasing, prices falling, and foreclosures on the rise

Store of value, medium of exchange, and what other factor define money?

Unit of value

Buyers Romy and Steven are looking over closing documents and don't know if the Loan Estimate matches everything on the Closing Disclosure. Usually, amounts shown on the Closing Disclosure that don't exactly match the figures on the Loan Estimate will be due to _______.

Updates to reflect the terms of the borrower's legal obligation when the loan closes

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

Value is pushed downward.

The Mortgage Disclosure Improvement Act gives applicants a three-day ______ to review and approve the Loan Estimate and Closing Disclosure form.

Waiting period

Which governmental legislation established the Consumer Financial Protection Bureau?

Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

Select the choice that best translates this clause into plain English. "Upon payment of all sums secured by this Mortgage, Mortgagee shall discharge this Mortgage without cost to Mortgagor. Mortgagor shall pay all costs of recordation, if any."

When the borrower has fully paid off the loan, the lender will record that the note is satisfied.

Page four of the Closing Disclosure lists specific disclosures about the loan, such as the penalty for late payments, whether a demand feature applies, whether the loan can be assumed, and ______.

Whether partial payments are accepted

A Treasury bond is a Treasury security ______.

With a maturity term of 30 years

Which item would an appraiser find in the Improvements section of the Uniform Residential Appraisal Report?

Year built

Gus has applied for a home equity line of credit from his federally insured bank so that he can make some renovations to his kitchen. The same bank is his lender for his home mortgage. Will this loan be subject to Real Estate Settlement Procedures Act requirements?

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit.

Greg is selling his home to a veteran who's using a VA loan. When the transaction starts to stall, Greg tries to motivate the buyer by including his giant flat screen TV, valued at $1,200, as a gift. Is Greg allowed to do this?

Yes, this is considered an allowable seller concession Gifts are considered seller concessions and can't exceed 4% of the sales price.

Which of these transactions must comply with Appraiser Independence Requirements?

Four-unit residence being purchased with a conventional loan AIR apply to conventional loans used to purchase a single-family dwelling of one to four units. Federally insured or guaranteed loans (such as FHA or VA or commercial loans) are exempt.

Which of these agencies is a government-sponsored enterprise?

Freddie Mac

The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time.

Funding fee

Which of these HUD programs allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market?

Ginnie Mae

Which of the following was created as part of the Homeowner Affordability and Stability Plan?

Home Affordable Modification Program (HAMP)

About 50% of the borrowers in Neighborhood One are Hispanic, while only 4% in Neighborhood Two are Hispanic. The median home price in both neighborhoods is the same. However, statistics show that there is a significantly greater percentage of minority and low-income borrows who were denied financing for loans on properties in Neighborhood Two and were offered lower rates to live in Neighborhood One. What act is intended to prevent this type of potentially discriminatory lending pattern?

Home Mortgage Disclosure Act

Which of these is actually an amendment to the Truth in Lending Act (TILA)?

Home Ownership and Equity Protection Act

Cindy is buying an older home. It's in reasonably good shape, but she figures she can reduce her energy bills by replacing some of the windows. If she applies for the FHA Energy Efficient Mortgage, what step must she take to receive approval?

Give her lender a report of the cost estimate and energy savings from an energy consultant.

The interest rate on an FHA Section 251 adjustable rate mortgage will ______.

Go up or down, but can't change more than a maximum number of points allowed by the FHA over the life of the loan

Sam has a mortgage that has a static interest rate, but monthly payments that increase over time according to a set schedule. What type of mortgage does Sam have?

Growing equity

Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. He's able to do this in part because of the ______ offered by the USDA Farm Service Agency.

Guaranteed loans

Beth needs help with the down payment to buy Mark's property. Mark is going to supplement Beth's bank loan with a second loan, allowing her to meet her lender's down payment requirements. What finance instruments may be used for this agreement?

Mortgage or deed of trust

Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's the purpose of this document?

To detail the estimated closing costs for Lawrence's loan

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

Sylvia is a single mother living in a small town surrounded by ranch and farm land. She would like to buy a house there, but her income level and her status as an independent contractor makes it hard for her to qualify for a conventional loan. What government program might provide her with a direct loan to purchase a home?

USDA Rural Development Single Family Housing Program

Which of the following applicants do NOT fall within the guidelines for an FHA-insured loan?

Will has a credit score of 650. Her housing ratio is 35%, and her total debt obligation is 41%. FHA requirements may be more lenient than conventional loans, but there are limits.

Is a homeowner with an FHA loan allowed to obtain a second mortgage?

Yes, if the total of the first and second mortgages is within the maximum loan to value ratio

Ron and Dawn hope to qualify for an FHA mortgage so they can buy a home for their family. Their housing ratio is 28%, their total debt obligation is 45%, and their credit score is 650. Do they qualify under FHA underwriting guidelines?

No, they don't meet the total debt obligation requirement. Underwriting requirements for an FHA loan specify a housing ratio of no more than 31%, a total debt obligation that doesn't exceed 43%, and a minimum credit score of 500, with 620 or higher being preferable.

In which phase of the real estate market would you expect to see properties selling for more than they're worth, many buyers in the market, and lots of new construction?

Over supply

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

In what phase of the real estate cycle do foreclosures rise and home prices fall?

Recession

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

Reconveyance

In which phase of the real estate market would you expect to see unemployment and foreclosures remain high but begin to stabilize?

Recovery

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

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

Title II

Beverly has applied for a loan to purchase a Craftsman-style home for herself and her teenage son. Her mortgage broker helps her find an FHA loan program that accommodates her low down payment. Which program will serve Beverly's needs?

Title II, Section 203(b)

Dana and Phil have evaluated their situation, and have decided to purchase a unit in a cooperative housing project. Which FHA loan program might work for them?

Title II, Section 203(n)

What's the purpose of the fixed/adjustable rate note?

To convert the interest rate from fixed to adjustable

It's possible for the adjustment period on an adjustable rate mortgage (ARM) to have ranges, such as three or ______ years apart.

10

There are three types of international buyers: those who have work visas and are looking for a home to purchase while they're in the U.S., those who are looking for a vacation home in the U.S., and those who are looking for ______.

A luxury home to purchase as an investment

Which of the following is part of the Other Disclosures section?

Liability After Foreclosure

Freddie Mac's mission is to provide ______, stability, and affordability in the U.S. housing market.

Liquidity

Two examples of loan adjustments or modifications are moratorium and ______.

Recasting

The upfront MIP on an FHA loan is calculated on ______.

The base loan amount

Who must provide the buyer and seller with a copy of the closing disclosure?

The buyer's lender

Which of the following statements is true about the Federal Reserve?

Twelve district banks comprise the Fed.

Which of the following factors carries the least weight when calculating a credit score?

Type of accounts

Seller Jerome found financing that would include his current mortgage inside the buyer's mortgage. What type of mortgage is this?

Wrap-around mortgage

Normal wages are considered when a lender is evaluating an applicant's income. Which of the following must be true for overtime pay to be considered?

It must have been received regularly over the last two years.

David purchased a house three years ago for $300,000. Considering historical property value fluctuations, what is the likely value of the property today?

It's difficult to tell. Historically, property values fluctuate up and down in the short term.

The three types of finance instruments that can be used when financing a real estate purchase are the note with mortgage, note with deed of trust, and ______.

Contract for deed

Which of the following items directly increases the supply of real estate properties on the market?

Conversion of properties The number of total properties on the market is directly influenced by the conversion of existing commercial properties to residential properties.

How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?

Half is received up front and the other half after the work is completed and approved

Which of the following programs broke the normal 80/20 ratio rule usually required as a loan-to-value and offered favorable interest rates?

Home Affordable Refinance Program (HARP) HARP assisted property owners who took out loans after 2009 at a higher interest rate by offering an option to refinance provided they kept up with their payments.

Which of the following entities commonly acts in the primary market?

Local credit union The primary mortgage market typically consists of local banks, credit unions, and insurance companies. Generally, these are lenders that work directly with borrowers who are obtaining a loan.

Store of value, unit of account, and what other factor define money?

Medium of exchange

The final page of the Closing Disclosure provides loan calculations that tell the consumer how much ______.

The loan costs, including total payments, finance charge, and TIP

Janie and Sam are newly married and are looking for their first home. They're fortunate that Janie's mom set aside some money to help with this purchase. Janie's mom says it's a loan, though, and they will have to pay her back. What's wrong with this?

The loan will go against their debt load. The problem here is that the money from Janie's mom can't be a loan. It must be given and treated as a gift, or it will impact Janie's debt load.

What is the purpose behind Appraiser Independence Requirements?

To protect appraisers' ability to assess an accurate value for a property by avoiding outside pressure or influence