Exam Unit 5: Sources of Funds: Institutional, Noninstitutional, and Other Lenders
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) credit union. D) mortgage banker.
a
A city looking to attract a particular business to the community may use revenue bonds to develop an industrial park or construct buildings that can be leased to tenants. These bonds are known as A) industrial revenue bonds. B) industrial development bonds. C) zero-coupon bonds. D) general obligation bonds.
a
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) junior financing. B) subprime financing. C) senior financing. D) high-cost financing.
a
A junior mortgage typically has a A) higher rate than the primary mortgage. B) lower interest rate than the first lien mortgage. C) rate set by the Federal Reserve. D) rate within 2% of the first lien mortgage.
a
A list of noninstitutional lenders would include all of the following EXCEPT A) a real estate mortgage trust. B) a pension program. C) a real estate bond. D) a life insurance company.
a
A woman recently invested in a REIT. The return on her investment will be based on A) income from apartment houses, offices, and shopping centers. B) a combination of mortgage interest and office rentals. C) interest on mortgages. D) profit from selling mortgage loans.
a
All of the following would be considered interim financing EXCEPT A) a home mortgage loan. B) a home improvement loan. C) a construction loan. D) a manufactured housing loan.
a
Because mortgage bankers are not providing real estate financing from deposits, they are A) less regulated than banks. B) not regulated at all. C) considered the same as a credit union. D) more regulated than banks.
a
Bonds for sale issued by a county to fund street improvements are called A) municipal bonds. B) trustee bonds. C) corporate bonds. D) local bonds.
a
Commercial banks participate in real estate activities in all of the following ways EXCEPT A) as real estate brokers. B) as mortgage bankers. C) as mortgage brokers. D) as trust executives.
a
Commercial banks' trust departments supervise and manage relatively large quantities of money and property for their beneficiaries. Examples of these beneficiaries include all of the following EXCEPT A) escrow agent for real estate settlement. B) guardian of estate of minors. C) trustee for a corporation. D) executor of estate.
a
Life insurance companies and pension funds are MOST concerned with A) the safety and stability of their investment. B) the FDIC insuring their accounts. C) a quick turnaround on their money. D) charging the maximum interest rates.
a
Manufactured home loans requiring a longer term for repayment are typically insured by the Federal Housing Administration (FHA) or through guarantees from the Department of Veterans Affairs (VA) and require the home to be A) permanently attached to the property. B) located in an urban renewal area. C) located in a rural area. D) in good condition.
a
Many of the real estate-related activities for commercial banks include construction loans, also known as A) interim financing. B) builder financing. C) secondary financing. D) permanent financing.
a
More than 70% of mutual savings banks' assets are derived from A) savings accounts. B) real estate mortgage trusts. C) interest on construction loans. D) checking account fees.
a
The first savings associations were established as building and loan associations, with the specific purpose of providing loans for A) housing construction. B) construction/permanent mortgages. C) home mortgages. D) home improvement.
a
The primary lenders of real estate loans may be called financial intermediaries. An essential characteristic of a financial intermediary is that A) funds remain available to their owners when called for. B) interest must be paid at market rates. C) investment is limited to real estate loans. D) only institutional lenders are eligible.
a
The single-most important source of private loan financing is A) sellers of property. B) private loan companies. C) foreign investors. D) family members.
a
A REIT has strict requirements that include all of the following EXCEPT A) have at least 75% of its total assets invested in real estate. B) have no more than 50% of shares held by 10 or fewer individuals. C) derive at least 75% of its gross income from rents or mortgage interest. D) distribute at least 90% of its taxable income to shareholders annually.
b
A life insurance company would MOST likely provide financing for a A) condominium project. B) shopping center. C) new high school. D) subdivision of 50 single-family homes.
b
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) direct deposit lending. B) warehousing. C) participation financing. D) interim financing.
b
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) within a certain price range. B) close to hospitals. C) low-income buyers. D) first-time homebuyers.
b
All of the following are institutional lenders EXCEPT A) savings associations (thrifts). B) credit unions. C) commercial banks. D) mutual savings banks.
b
Credit unions have been able to expand their services to include home mortgage loans as the result of A) demand from depositors. B) legislation allowing for increased membership. C) more aggressive advertising. D) support from Fannie Mae.
b
Demand deposits are also known as A) short-term securities. B) checking accounts. C) certificates of deposits. D) Treasury bonds.
b
If a mortgage company requires licensing requirements for loan originators, it must comply with the A) Equal Credit Opportunity Act (ECOA). B) Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act). C) Community Reinvestment Act (CRA). D) Fair Lending Act (FLA).
b
Of all the financial institutions, the ones with the MOST flexibility in their mortgage lending operations are A) life insurance companies. B) savings associations (thrifts). C) commercial banks. D) mutual savings banks.
b
Participation financing is a type of financing most commonly seen with a lender such as A) a mutual savings bank. B) a life insurance company. C) a credit union. D) a pension fund.
b
The SAFE Act was passed to provide protection to the public from A) real estate brokers. B) mortgage loan originators. C) municipal bond brokers. D) investment trusts.
b
The three types of real estate investment trusts (REITs) include all of the following EXCEPT A) mortgage REIT. B) geographic REIT. C) equity REIT. D) hybrid REIT.
b
To finance a new toll bridge, a city could appropriately issue A) an industrial revenue bond. B) a revenue bond. C) a corporate bond. D) a general obligation bond.
b
Under 2016 tax law, anyone may make a gift to another person with no tax consequences of up to A) $13,000. B) $14,000. C) $12,000. D) $11,000.
b
When a buyer is considering requesting seller financing, it is BEST to request this arrangement A) before the appraisal. B) when making the offer. C) once the offer is accepted. D) at time of settlement.
b
When a seller provides financing in the form of a second mortgage, the seller/lender can minimize the risk of not being paid on the second mortgage in the event of default by A) requiring six months of cash reserves. B) setting up a collection escrow account for the first and second loan. C) charging more points. D) requiring credit approval.
b
When people want to obtain financing for the cost of an addition, modernization, or swimming pool construction, they typically apply for a A) construction loan. B) home improvement loan. C) interim loan. D) long-term security.
b
Which of these joins borrowers with lenders for real estate loans? A) Loan processors B) Mortgage brokers C) Mortgage bankers D) Mortgage servicers
b
A couple applies for a mortgage loan. Their loan officer will take all steps to qualify the borrowers, prepare the loan package, and submit it to one or more lenders. This loan officer works for A) a mortgage banker. B) a commercial bank. C) a mortgage broker. D) a real estate broker.
c
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) compensation of originators. C) net worth and/or regulatory capital. D) cash reserves.
c
A mutual savings bank might be found in any of the following states EXCEPT A) Massachusetts. B) Ohio. C) California. D) Pennsylvania.
c
A person's house was burglarized in which bonds were stolen. The owner of the bonds is not concerned about the thief cashing the bonds, because the bonds are A) unsecured bonds. B) general obligation bonds. C) registered bonds. D) corporate bonds.
c
A popular use of real estate bonds is to finance municipal improvement projects. These bonds are usually considered A) secured bonds. B) registered bonds. C) general obligation bonds. D) corporate bonds.
c
A young couple wants to purchase a home and realizes that they are short on funds and need some assistance from their parents. The parents can assist with financing as long as a A) promissory note is executed before closing. B) balloon note is executed for five years. C) gift form/letter is executed from the donor. D) loan for the amount is made through a credit union.
c
Commercial banks participate in real estate financing through all these activities EXCEPT A) indirect or direct ownership of other lending businesses B) acting as mortgage bankers C) by acquiring insurance companies D) operation of their trust departments
c
In addition to acting as originating and servicing agents for their own mortgages, many commercial banks act as mortgage bankers for other commercial banks, life insurance companies, or other real estate investment trusts so they can A) invest in communities to create goodwill. B) provide more investment opportunities. C) generate origination and servicing fees. D) create more market share.
c
One aspect of investment of pension retirement funds that has created concern due to the recent financial crisis is the purchase of A) government securities. B) home mortgage loans. C) blocks of mortgage-backed securities. D) corporate stocks and bonds.
c
The agency required to keep a registry of mortgage loan originator licenses is the A) Annual Registration Licensing System (ARLS). B) National Procurement System (NPS). C) National Mortgage Licensing System (NMLS). D) HUD license system.
c
To qualify for the advantages of being a pass-through entity for U.S. corporate income tax, a real estate investment trust must be all of the following EXCEPT A) be taxable as a domestic corporation. B) be managed by a board of directors or trustees. C) jointly owned by 50 or more persons. D) be structured as a corporation, trust, or association.
c
Under the Credit Union Membership Access Act, members of a credit union are allowed to invite any of the following to join their credit union EXCEPT A) a live-in housekeeper. B) a daughter and son-in-law living in a nearby town. C) members of neighborhood homeowners associations. D) a nursing care professional taking care of a family member.
c
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) third party investors. B) mortgage brokers. C) correspondents. D) affiliated businesses.
c
When sellers of a property decide to provide financing, it's usually because A) they are civic minded. B) the homeowners association requires seller financing. C) other financing is not available. D) the property is located in a rural area.
c
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) student loans. C) equity loans. D) car loans.
c
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) general obligation bond. B) mortgage loan bond. C) federal bond. D) zero-coupon bond.
d
A city looking to build several parks in the community, along with other civic projects, would issue A) industrial development bonds. B) industrial revenue bonds. C) mortgage revenue bonds. D) general obligation bonds.
d
A mortgage secured by a lien on a property that is subordinate to another mortgage on the same property is called a A) contract for deed. B) primary mortgage. C) discounted mortgage. D) junior mortgage.
d
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) interest on mortgages. C) profit from selling mortgages. D) income from apartment houses, offices, and shopping centers.
d
Commercial loans are primarily designed to make loans to businesses to finance their A) condo developments. B) real estate activity. C) company expansion. D) operations and inventories.
d
Historically, pension fund monies have been invested in A) mortgage-backed securities. B) participation financing of office buildings. C) home mortgage loans. D) government securities and stocks and bonds.
d
In the mortgage banking world, a warehouse of funds refers to A) a storage place for mortgage loans. B) a marketplace for the sale of mortgage loan packages. C) a physical building where money is kept. D) an amount of funding temporarily provided by a commercial bank.
d
The Real Estate Investment Trust Act of 1960 provided vehicles for real estate investors to enjoy special income tax benefits through investment in A) regulated investment companies. B) mutual funds. C) stocks and bonds. D) real estate trusts.
d
The fees generated from checking accounts generate revenue for A) savings and loans institutions. B) mutual savings banks. C) the Federal Reserve. D) commercial banks.
d
The licensing requirements of the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) apply to all A) loan processors. B) loan underwriters. C) real estate professionals. D) loan originators.
d
The only typical banking service offered by a mortgage banker is A) a checking account. B) a safe-deposit box. C) a savings account. D) a mortgage loan origination.
d
The primary activity that marks the difference between a mortgage broker and a mortgage banker is that a mortgage banker will A) receive payment for originating the loan. B) charge a higher rate of interest. C) prepare the loan package for underwriting. D) service the loan after settlement.
d
The type of institutional bank that is owned by its members is A) a savings and loan bank. B) a credit union. C) a commercial bank. D) a mutual savings bank.
d
When a company issues bonds that are a claim against its general assets, they are called unsecured bonds or A) unlicensed bonds. B) registered bonds. C) bearer bonds. D) debentures.
d
