Real Estate Finance Exam

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

Mortgage blocks from secondary mortgage market

A local town has been growing and needs a new elementary school. What kind of bond instrument will the town use to finance this project?

Municipal bond

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

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

The buyer's lender

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

The introduction of the long-term amortized loan

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

If Mitch uses a financial system that allocates a percentage of income to his expenses and financial goals, how much will his retirement fund receive from a commission check of $8,000?

The percentage of $8,000 that Mitch has allocated to his retirement goal

How is title usually conveyed to the buyer during a foreclosure process?

Through a referee's deed

What is the purpose of the loan transfer disclosure?

To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments

What's the purpose of the ECOA?

To prevent discrimination in lending

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

Unit of value

A debenture is also known as a ______ bond.

Unsecured

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

Vulnerable

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

Buyer

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

Calculated Cash to Close

Which of the following is included in HMDA data?

Census tract information

Payment history, age of accounts, inquiries, and types of accounts are factors considered in calculating a credit score. What's another item that's considered?

Credit usage

Which of the following describes amortized debt?

Debt that's paid off by making periodic payments

Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.

For a 50% discount off list price and a down payment of only $100

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

Bindy received a loan based on the amount of equity she had in her house. She used this lump sum to fund her daughter's college education. What type of loan did she get?

Home equity

Which of the following specifies a requirement of pre-loan counseling for consumers?

Homeowner and Equity Protection Act

Sandra is a single woman fresh out of college. She hopes to qualify for an FHA loan. Her lender calculates her housing ratio as 31% and her total debt obligation as 43%. Her credit score is 480. Does she qualify under FHA underwriting guidelines?

No, she doesn't meet the credit score requirement.

Which of these items is an asset to list on a residential loan application?

Real estate

The FHA is part of ______.

The Department of Housing and Urban Development

Which of the following describes the prime rate?

The rate at which a bank or lender may loan money to its most creditworthy borrowers

The loan amount plus the down payment should equal ______.

The sales price of the home

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

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.

_______ are part of the loan-approval process and are responsible for completing a loan application and supplying supporting documentation.

Buyers

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

Decreases

Norma, a real estate licensee, is working with the buyers in a transaction. She suspects mortgage fraud. What should she do?

Discuss the situation with her broker.

How does the Community Development Block Grant program assist in supporting HUD's mission?

Distributes grant funding to help meet community needs as determined by state and local governments

Which of the following is an aspect of government loans?

Either insured or guaranteed by the government

When a promissory note is sold, how is ownership transferred?

Endorsement of the note

HUD's ______ assists very low-income families, the elderly, and disabled individuals in affording decent, safe, and sanitary housing in the private market.

Housing Choice Voucher Program

Which of the following characteristics applies to a partnership between mortgagors?

It involves more than one mortgagor as owner, sharing responsibility for payment of a single mortgage.

What is the name for a loan that creates a lien against property that already has been pledged as collateral?

Junior loan

Which of these business structures offers personal liability protection in the event of a lawsuit against the licensee's business?

LLC

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

Which of the following may a lender request to verify an applicant's work history and earning information?

Pay stub

Which of the following is the best investment for a licensee?

Paying down outstanding credit card debt

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 entry and possession?

Petition to enter, repossession, notice of eviction

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 qualifying ratios are used in a VA home loan?

Residual income and debt-to-income

When interest rates increase, what is the impact on mortgage-backed security investors?

Returns on investments increase.

A RAM is a type of equity financing. What does RAM stand for?

Reverse annuity mortgage

A loan that's offered based on a homeowner's equity in which funds are drawn over time and the bank gains corresponding property ownership is called a ______.

Reverse annuity mortgage

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

A home equity line of credit (HELOC) is based on the homeowner's available ______.

Equity

Glen is assisting a buyer who makes an offer on a condo in a high-end area of town. The seller refuses the offer, and Glen's client believes this is discriminatory behavior. How should Glen advise his client in this situation?

Glen can recommend filing a complaint with HUD about the alleged discrimination.

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

The Community Reinvestment Act (CRA) requires lenders to post their policies on what?

Lending

The Federal Housing Finance Agency established percentage targets and ______ for loans made to low- to moderate-income borrowers.

Limits for conforming loans

The lender, the depository institution, and the _______ all complete parts of the request for verification of deposit form.

Loan applicant

Which of the following is a requirement for veterans who wish to use the Native American Direct Loan?

Meet the same eligibility criteria as for the VA-guaranteed loan program

What does it mean if the Fed decreases reserve requirements?

Member banks can keep fewer assets on deposit at the reserve bank.

Jasmine wants to buy a duplex where the mortgage is $300,000. Her income only qualifies her for a $200,000 loan, and she doesn't have enough saved to make up the difference. What factor might allow her to obtain financing anyway?

Rental income

What type of investment strategy is most similar to a 1031 tax-deferred exchange?

Rolling over funds from one IRA into another

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

Section 251

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

Your client, Shelby, a veteran using a VA loan to finance her purchase, just learned that the CRV came in lower than the sales price. But no problem: Shelby's brother is willing to loan her the difference. If the loan is approved, ______.

Shelby must still be under the VA's debt-to-income ratio

Ray is in a bit of a predicament. He owes more on his mortgage than his property is worth, but can no longer afford the payments. He receives permission from his lender to sell the property for less than what he owes. What is this an example of?

Short sale

Remy's mortgage payment is $1,256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?

$1,129.53

Your client, Ray, wants to purchase a home listed for $200,000. The home is in a revitalization area, and Ray can purchase it under the Good Neighbor Program. How much will he have to pay for the home?

$200,000, less 50%, plus $100

Which of the following is the credit score range?

300 and 850

A buyer with which of the following debt-to-income ratios can obtain a qualified mortgage?

38%

You do a listing presentation to a potential client over lunch at a nice restaurant. How much of your meal cost is considered tax deductible?

50%

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.

In a deed of trust, who is the trustee?

A neutral third party

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

In which of the following sections of a credit report might a lender expect to find a loan that has been paid off on time?

Accounts in good standing

How are account numbers displayed in a credit report?

Accounts numbers are truncated for security purposes.

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

American Taxpayer Relief Act of 2012

Laura is a newly licensed real estate professional. Which of these combinations of insurance does the law and her career choice make it essential that she carry?

Auto and errors and omissions

Which of the following describes mutual savings bank loans?

Banks focus lending offerings on local businesses and residents.

Carla is a licensee who uses a personal financial system that recommends that all of her commission checks be deposited into her ______ account.

Business checking

If your client's attorney contacts you, saying you were negligent in providing your client with service, which insurance coverage do you desperately hope you have?

Errors and omissions

This could happen if a factory were put in next door that changed and impacted property value.

External obsolescence

Licensees who stay current with ______ can better serve low- to moderate-income clients looking to purchase.

FHA financing requirements

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

Farm Credit Administration

Farmer Mac is supervised by which entity?

Farm Credit Services 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

Which of the following might involve old wiring or plumbing?

Functional obsolescence

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 program, what step must she take to receive approval?

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

A seller buydown can ______.

Help a borrower meet lender qualification standards

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

Identify the data that is needed.

Which of the following approaches to value uses a capitalization rate?

Income approach

The Equal Credit Opportunity Act specifies that credit applicants must be judged using only what criteria?

Income, net worth, job stability, and credit rating

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

Construction loans are a type of ______ financing.

Interim

What does the right of redemption allow?

It allows a property owner to pay back any debts or liens against their property until a foreclosure sale is held.

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.

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

A lender wants to ensure that the legal description of a property is accurate, and determine whether any improvements, encroachments, or lot size changes have been made. What may the lender request to determine this?

Survey

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.

From a secondary market player, Regional State Bank received an advance in exchange for collateral in the form or mortgages. Which entity likely issued this advance?

Federal Home Loan Bank