Unit 5 - Sources of Funds: Institutional, Noninstitutional and other Lenders (Questions)

Under 2016 tax law, anyone may make a gift to another person with no tax consequences of up to A) $11,000. B) $13,000. C) $12,000. D) $14,000.

$14,000.

Commercial banks are designed primarily to provide financing for single-family owner-occupied homes. True False

False

Private lenders have less flexibility than other types of lenders and therefore cannot take as many risks. True False

False

Which of these joins borrowers with lenders for real estate loans? A) Mortgage brokers B) Mortgage servicers C) Mortgage bankers D) Loan processors

Mortgage brokers

Credit unions are established as nonprofit financial organizations. True False

True

Federally chartered savings banks must participate in the FDIC insurance program. True False

True

Foreign investment in the American economy has been increasing. True False

True

Mortgage bankers generally service the loans they create, collecting payments, inspecting the properties, and foreclosing where necessary. True False

True

Mortgage brokers generally specialize in loans for large-scale residential, commercial, and industrial developments. True False

True

Mutual banks are owned by their depositors. True False

True

Real estate investment trusts are designed to deal in equities. True False

True

Real estate trusts must be beneficially owned by at LEAST 100 investors. True False

True

Historically, pension fund monies have been invested in A) participation financing of office buildings. B) mortgage-backed securities. C) government securities and stocks and bonds. D) home mortgage loans.

government securities and stocks and bonds.

Mortgage brokers generally arrange to collect the payments on the loans they create. True False

False

A mutual savings bank located in upstate New York would MOST likely approve A) a loan for $150,000 interim financing for construction loan. B) a loan for $150,000 to start a new business. C) a $150,000 mortgage loan in Atlanta, Georgia. D) a $150,000 mortgage loan on property in Buffalo, New York.

a $150,000 mortgage loan on property in Buffalo, New York.

All of the following would be considered interim financing EXCEPT A) a manufactured housing loan. B) a construction loan. C) a home mortgage loan. D) a home improvement loan.

a home mortgage loan.

The only typical banking service offered by a mortgage banker is A) a safe-deposit box. B) a checking account. C) a mortgage loan origination. D) a savings account.

a mortgage loan origination.

To finance a new toll bridge, a city could appropriately issue A) a revenue bond. B) a general obligation bond. C) an industrial revenue bond. D) a corporate bond.

a revenue bond.

Commercial banks participate in real estate activities in all of the following ways EXCEPT A) as real estate brokers. B) as mortgage brokers. C) as mortgage bankers. D) as trust executives.

as real estate brokers.

A state financing agency that wants to encourage homeownership with a certain segment of the housing market can use tax exempt bonds as long as the market meets all of these criteria EXCEPT A) first-time homebuyers. B) within a certain price range. C) low-income buyers. D) close to hospitals.

close to hospitals.

When lenders make loans on properties located far from where they can personally supervise, they may seek to invest in real estate transactions through the use of local intermediaries, called mortgage bankers or A) mortgage brokers. B) affiliated businesses. C) correspondents. D) third party investors.

correspondents.

All of the following are institutional lenders EXCEPT A) savings associations (thrifts). B) mutual savings banks. C) commercial banks. D) credit unions.

credit unions.

When the Internal Revenue Service (IRS) eliminated tax deductions for interest paid on consumer loans but preserved the deductions for interest paid on home loans, more interest was created in A) construction loans. B) equity loans. C) student loans. D) car loans.

equity loans.

A REIT has strict requirements that include all of the following EXCEPT A) distribute at least 90% of its taxable income to shareholders annually. B) have no more than 50% of shares held by 10 or fewer individuals. C) have at least 75% of its total assets invested in real estate. D) derive at least 75% of its gross income from rents or mortgage interest.

have no more than 50% of shares held by 10 or fewer individuals.

A junior mortgage typically has a A) rate within 2% of the first lien mortgage. B) rate set by the Federal Reserve. C) lower interest rate than the first lien mortgage. D) higher rate than the primary mortgage.

higher rate than the primary mortgage.

A woman recently invested in a real estate investment trust (REIT). The return on her investment will be based on A) a combination of mortgage interest and office rentals. B) profit from selling mortgages. C) income from apartment houses, offices, and shopping centers. D) interest on mortgages.

income from apartment houses, offices, and shopping centers.

To qualify as a pass-through entity for U.S. corporate income tax, a REIT must be all of the following EXCEPT A) structured as a corporation, trust, or association. B) jointly owned by less than 100 persons. C) managed by a board of directors or trustees. D) have transferable shares or certificates of interest.

jointly owned by less than 100 persons.

A house is selling for $180,000 and the seller owes $140,000. The borrower is short $40,000 for the down payment, but the seller is willing to carry back $20,000 of the $40,000 equity as a second mortgage as long as the buyer agrees to pay $20,000 cash. This type of financing by the seller is called A) subprime financing. B) senior financing. C) junior financing. D) high-cost financing.

junior financing.

The licensing requirements of the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) apply to all A) real estate professionals. B) loan processors. C) loan originators. D) loan underwriters.

loan originators.

A borrower has applied for a loan from a mortgage company that intends to process the loan and then submit it to an investor for underwriting, closing, and funding. This borrower has applied with a A) mortgage broker. B) mortgage originator. C) mortgage banker. D) credit union.

mortgage broker.

A mortgage banker must have capital to fund loans and is expected to have a specified level of A) government loans versus conventional loans. B) cash reserves. C) net worth and/or regulatory capital. D) compensation of originators.

net worth and/or regulatory capital.

When sellers of a property decide to provide financing, it's usually because A) other financing is not available. B) they are civic minded. C) the homeowners association requires seller financing. D) the property is located in a rural area.

other financing is not available.

Of all the financial institutions, the ones with the MOST flexibility in their mortgage lending operations are A) commercial banks. B) life insurance companies. C) savings associations (thrifts). D) mutual savings banks.

savings associations (thrifts).

The primary activity that marks the difference between a mortgage broker and a mortgage banker is that a mortgage banker will A) prepare the loan package for underwriting. B) charge a higher rate of interest. C) service the loan after settlement. D) receive payment for originating the loan.

service the loan after settlement.

A life insurance company would MOST likely provide financing for a A) subdivision of 50 single-family homes. B) shopping center. C) new high school. D) condominium project.

shopping center.

A mortgage banker operating as a correspondent lender typically does not have his own funds to lend, so he establishes a line of credit with commercial banks that is called A) participation financing. B) warehousing. C) interim financing. D) direct deposit lending.

warehousing

When a buyer is considering requesting seller financing, it is BEST to request this arrangement A) once the offer is accepted. B) before the appraisal. C) when making the offer. D) at time of settlement.

when making the offer.

A U.S. savings bond is an example of a type of bond that is bought at a price lower than its face value, with the face value repaid at the time of maturity without making any interest payments. This type of bond is called a A) federal bond. B) mortgage loan bond. C) zero-coupon bond. D) general obligation bond.

zero-coupon bond.