Real Estate Finance Course

Under current tax law, what's the maximum tax-free gift an individual can give to another individual annually?

$15,000: Under current tax law, individuals may gift up to $15,000 tax-free to any individual annually.

A buyer with a $350,000 loan has a monthly principal and interest payment of $2,102.36. If $1,801.23 is interest, what's the new principal balance after the first payment is applied?

$349,698.87

What is the formula for calculating the total housing ratio?

(Monthly housing expenses ÷ gross monthly income) × 100

Generally, what's the common range for loan origination fees?

1% to 3%

A note matures in...

2-10 years

A bond matures in...

20-30 years

Who or what entity directs the activities of credit unions?

A board of directors

Your business is booming, and you'd really like someone else to maintain your financial records. The best person for this role is ______.

A bookkeeper

Deed in Lieu of Foreclosure

A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a way for the mortgagor to avoid foreclosure.

Deed of Trust

A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two. The third party holds naked title for the benefit of the lender. Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party)

What's the acronym for the legislation that established processes and procedures for how federal agencies propose and enforce regulations?

APA: APA stands for the Administrative Procedure Act.

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

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

An unlimited loan-to-value ratio: The FHA Streamline Refinance program allows an unlimited loan-to-value ratio, which benefits homeowners who may be underwater in their homes.

A short-term security issued by the Treasury that has a maturity term of one year or less is called a Treasury ______.

Bill

Which of the following statements about liens is true?

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

The Federal Housing Administration funds its mortgage insurance program ______.

By charging borrowers a mortgage insurance premium

How can a foreclosure process be temporarily stalled?

By filing for Chapter 7 bankruptcy

Mutual savings banks have limitations on their lending activities, as specified in their ______.

Charter

Dorinda is an investor. She recently purchased shares in a tranche that holds mortgages and mortgage-backed securities. In what did she invest?

Collateralized mortgage obligation

Commercial banks offer interim financing in the form of ______ loans.

Construction

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

Because of the Mortgage Disclosure Improvement Act, the only advance fee that a creditor can charge to a consumer before providing required loan disclosures is a(n) ______ fee.

Credit report

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

FDIC

The Farm Credit System is overseen by the ______, an agency of the federal government.

Farm Credit Administration

______ works with lenders to make long-term credit available to homeowners and businesses in agricultural and rural communities, including farmers and ranchers.

Farmer Mac

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

Federal funds

Another term for a valuation is ______.

Formal appraisal

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

Ginnie Mae

The Government National Mortgage Corporation was created in 1968 under the Department of Housing and Urban Development (HUD) and is more commonly known as ______.

Ginnie Mae: Ginnie Mae was created as the Government National Mortgage Corporation in 1968 under the Department of Housing and Urban Development (HUD).

The three general groups of international buyers that real estate professionals may encounter are those who ______, those who are looking for a vacation home for when they travel to the U.S., and those who are looking for a luxury property as an investmen

Have work visas and are looking for a home to purchase while they're in the U.S.

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.

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

Interest

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.

What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?

Late charge: Late charges that will apply if the borrower doesn't pay on time are a standard part of the promissory note.

In a deed of trust, who is the beneficiary?

Lender

Which of these items should you expect to include when calculating your start-up costs as a licensee?

License fee

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

Liquidity

With a ______, no probate is required for assets named within it.

Living trust

Kendra is purchasing a home and is ready to find a lender who will give her terms that she can afford. She has done her homework and knows that she can use the ______ to compare loans and find the one that will best meet her needs.

Loan Estimate: The Loan Estimate form is designed to help consumers compare loan terms in order to find a loan that best meets their needs.

Which generation financed their homes due to also having other debt obligations?

Millennials

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

Mortgage blocks from secondary mortgage market

In the secondary market, mortgages are grouped together and sold as ______.

Mortgage-backed securities

Which type of bond is used to pay for community improvements?

Municipal bond

What information is included on the Loan Estimate form so that the consumer can confirm the reputation of lending institution and individual?

Nationwide Mortgage Licensing System IDs

A Notice of Default has been filed to begin the non-judicial foreclosure process. How soon can the Notice of Sale be issued?

No sooner than three months

Which method of foreclosure does not involve the court, but includes a trustee's sale?

Non-judicial

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

Which is the most important factor used to determine a credit score?

Payment history

If Jeff is healthy and always has excellent check-ups, which of the following would likely be the most important factor in his insurance selection?

Premiums: Because of his fortunate good health, Jeff will save more overall by looking for a low-premium plan with good coverage.

Mortgage bankers are mostly ______ enterprises.

Private

______ is when the outstanding loan balance is reconfigured. It is a form of loan modification.

Recasting

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.

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

Requirements that must met before a title policy will be issued

The ______ sets requirements for mortgage loan originators.

Secure and Fair Enforcement for Mortgage Licensing Act

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

Sold: The value of sold bonds fluctuates with the ups and downs of the market.

The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.

Streamline Refinance

Some countries have banks that issue loans for U.S. real estate purchases. What are the main countries that participate?

Taiwan, the U.K., and Canada

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

The PMI Act of 1998

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

What's true about the draw period on a home equity line of credit (HELOC)?

The draw period varies.

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

The right to foreclose: The lender has an interest in the property and may foreclose in the event of borrower default, but the lender does not carry rights of possession or control.

The funding fee on a VA loan is waived when ______.

The veteran has a 10% or higher VA disability

One difference between a judicial foreclosure and a non-judicial foreclosure is that with a non-judicial foreclosure, ______.

There is no statutory right of redemption

What's the purpose of California's Covered Loan Law?

To curb predatory lending practices

What is the purpose of the California Foreclosure Reduction Act?

To regulate lenders so that borrowers have a better chance to avoid foreclosure

Back-end ratio is another term for ______.

Total debt ratio

What does TILA stand for?

Truth in Lending Act

Direct farm ownership loans from the ______ may be used to buy farmland, construct and repair buildings, and make farm improvements.

USDA Farm Service Agency

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.

Contract of Deed

_______ is a real estate transaction in which the purchase of the property is financed by the seller rather than a third party such as a bank, credit union or other mortgage lender.

A bill matures in..

one year or less

What is the minimum amount of time a Notice of Sale must be posted on a property before the foreclosure sale can take place?

20 days

Borrowers should be wary of lenders who offer mortgages at more than ______ over current market interest rates.

5%: Subprime lenders may charge 1% to 5% over current market rate but anything higher than that could be an indication of predatory lending practices.

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.

579 or lower: Sixty-one percent of consumers with a credit score of 579 and lower, like Margot, are likely to become seriously delinquent. Because of this, they have difficulty getting new loans or approvals on credit cards.

Victor is selling his property to Sheila. He's acting as the lender, and the property is unencumbered. Which of the following options describes the type or types of financial instruments Victor may use for the loan agreement?

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

A foreclosure consultant was found guilty of violating the Mortgage Foreclosure Consultant Law. As a result, the consultant could face fines up to $10,000, up to ______, or both.

One year in prison

The buying and selling of government securities as a way to influence the money supply and balance economic growth describes ______.

Open-market operations

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

80/10/10

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

800+

Danny and Wendy recently relocated to California. They are buying a three-bedroom home in an established neighborhood where they look forward to raising a family. Their real estate agent, Brunhilda, thinks that their income, which is on the low side, and the property could make them eligible for ______, which would offer reduced, fixed interest rates on a loan.

A CalHFA loan product

Which range of credit scores do most consumers fall into?

670 to 739

The median credit score for most consumers is _______.

670-739

Denzel's loan payments have been reduced because his lender agreed to extend the amortization schedule stated on his note. This is the result of a ______.

Loan modification agreement

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.