Chapter 9, Chapter 8, Chapter 10, Chapter 11

6. Mortgage originators often offer many types and forms of available residential loans as part of their mortgage menu. However, the predominant form of prime conventional mortgage remains the: A. (fixed-rate) level payment mortgage (LPM) B. adjustable rate mortgage (ARM) C. subprime mortgage D. alt-A mortgage

A. (fixed-rate) level payment mortgage (LPM)

14. Gross income multiplier analysis assumes that the subject and comparable properties are collecting market rents. Therefore, it is frequently argued that an income multiplier approach to valuation is most appropriate for properties with short-term leases. Which of the following property types, therefore, would we find it most appealing to use a gross-income multiplier in our analysis? A. Apartments B. Office C. Industrial D. Retail

A. Apartments

11. Most appraisers adhere to an "above-line" treatment of capital expenditures. This implies which of the following? A. Capital expenditures are subtracted in the calculation of net operating income. B. Capital expenditures are subtracted from net operating income to obtain a net cash flow measure. C. Capital expenditures are added to net operating income. D. Capital expenditures are excluded from all calculations because they are difficult to estimate.

A. Capital expenditures are subtracted in the calculation of net operating income.

20. Traditional home mortgage underwriting is said to rest on three elements, the "three C's." Recent research (e.g., Archer and Smith, 2011) has confirmed that the underwriting characteristic most strongly associated with default is: A. Collateral B. Creditworthiness C. Capacity D. Capability

A. Collateral

3. Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government? A. Conventional home loan B. Federal Housing Administration loan C. Veterans Affairs loan D. Section 203 loan

A. Conventional home loan

12. The Federal National Mortgage Association (Fannie Mae) was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans. All of the following statements regarding Fannie Mae are true EXCEPT: A. Fannie Mae lends money directly to homebuyers B. Fannie Mae was once a private, self-supporting company with publicly traded stock that has now been placed into conservatorship by the United States government following the mortgage crisis of 2007-2008. C. Fannie Mae fully guarantees timely payment of interest and principal to investors. D. Fannie Mae is authorized to buy both conventional home loans and government-sponsored residential mortgages.

A. Fannie Mae lends money directly to homebuyers

11. It would be hard to overstate the importance of the Federal Housing Administration (FHA) in the history of housing finance. Which of the following instruments created by the FHA is considered the single most important financial instrument in modern housing finance? A. Level-payment, fully amortizing loan B. Adjustable rate mortgage  C. Partially-amortizing balloon loan D. Subprime mortgage loan

A. Level-payment, fully amortizing loan

7. Lenders generally require private mortgage insurance (PMI) for conventional loans over 80 percent of the value of the security property. PMI protects a lender against which of the following? A. Losses due to default on the loan B. Legal threat to the lender's mortgage claim C. Stoppage of mortgage payment after the death of the insured borrower D. Changes in the index rate associated with an adjustable rate mortgage

A. Losses due to default on the loan

24. A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the: A. Mortgage (Deed of Trust) B. Listing Contract C. Note D. Assignment of Mortgage

A. Mortgage (Deed of Trust)

6. The emergence of mortgage securities propelled the development of mortgage companies, an entity significantly different from the thrifts and banks that previously dominated the mortgage landscape. Which of the following parties is responsible for providing mortgage origination services and initial funding within this new framework? A. Mortgage banker B. Mortgage broker C. Portfolio lender D. Security analyst

A. Mortgage banker

1. Which of the following measures is considered the fundamental determinate of market value for income-producing properties? A. Net operating income B. Potential gross income C. Operating expenses D. Capital expenditures

A. Net operating income

22. Suppose a homeowner is reluctant to refinance until he is reasonably sure that interest rates are not going to fall appreciably from where they currently are. In this case, the homeowner appears to be concerned about which of the following costs associated with refinancing? A. Opportunity cost B. Tax consequences C. Default risk D. Upfront fees

A. Opportunity cost

1. Total mortgage debt outstanding as of the third quarter of 2011 approached $13.6 trillion. Which of the following types of mortgage loans accounts for the greatest percentage of mortgage debt outstanding? A. Residential (1-4 family) B. Apartment (multifamily) C. Commercial D. Farm

A. Residential (1-4 family)

16. Despite the risks that are inherent in the mortgage lending process, mortgage bankers have various tools at their disposal to hedge risk exposure. For example, since mortgage bankers know that only part of the loan commitments that they issue will be taken down by borrowers, they can purchase the right to sell a certain dollar amount of a certain loan type in the secondary market through what is commonly referred to as a: A. Standby forward commitment B. Mortgage pipeline C. Conduit D. Collateral

A. Standby forward commitment

22. The traditional approach to loan underwriting has virtually been replaced by an automated underwriting process that involves a statistically derived equation to determine the level of default risk associated with a loan application. All of the following statements regarding the automated underwriting process are true EXCEPT: A. The marginal cost per loan underwritten using the automated process is greater than the case of traditional underwriting. B. The time taken to approve a loan using the automated process is considerably shorter than the case of traditional underwriting C. The success in identifying risky loans is higher using the automated process than is the case with traditional underwriting D. Automated underwriting has made home ownership available to households for whom it previously was inaccessible.

A. The marginal cost per loan underwritten using the automated process is greater than the case of traditional underwriting.

23. In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as: A. Title theory states B. Lien theory states C. Conforming states D. Nonconforming states

A. Title theory states

3. The process of converting periodic income into a value estimate is referred to as income capitalization. Income capitalization models can generally be categorized as either direct capitalization models or discounted cash flow models. Which of the following statements best describes the direct capitalization method? A. Value estimates are based on a multiple of expected first year net operating income. B. Appraisers must make explicit forecasts of the property's net operating income for each year of the expected holding period. C. Appraisers must select the appropriate yield at which to discount future cash flows. D. The forecast must include the net income produced by a sale of the property at the end of the expected holding period.

A. Value estimates are based on a multiple of expected first year net operating income.

21. Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the: A. demand clause B. insurance clause  C. escrow clause D. exculpatory clause

A. demand clause

7. Mortgage banks typically will attempt to sell loans as quickly as possible after they are originated by either issuing mortgage securities or selling the loan to an intermediary that will subsequently sell the loan in the secondary market. The period between loan commitment and loan sale is referred to as the: A. mortgage pipeline B. mortgage note C. mortgage fallout D. mortgage term

A. mortgage pipeline

9. With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are commonly referred to as: A. recourse loans B. nonrecourse loans C. conforming loans D. nonconforming loans

A. recourse loans

15. The hybrid ARM attempts to balance the fixed payment desire of a borrower with the lender's desire to increase interest rates if market rates rise in the future. In its most common form, known as a 2-28, the hybrid ARM will have a fixed-interest rate for: A. 1 year B. 2 years C. 26 years D. 28 years

B. 2 years

14. In contrast to conventional home loans, the interest-only balloon loan requires the borrower to pay off the loan with a "balloon" payment equal to the original balance after: A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years

B. 5-7 years

3. In the early 1970's, home mortgage lenders were predominantly depository institutions. By the end of the decade, the growth of deposits at these institutions became negative due to the emergence of more attractive investment opportunities such as money market funds. This change in the distribution chain of funds is more commonly referred to as: A. Deregulation B. Disintermediation C. Warehousing D. Underwriting

B. Disintermediation

2. Net operating income is similar to which of the following measures of cash flow in corporate finance?

B. Earnings before deductions for interest, depreciation, income taxes, and amortization (EBIDTA)

4. In 1989, Congress took major steps to establish depository institution accountability by requiring these institutions to hold more capital as they take on riskier assets. Which of the following Congressional acts imposed these capital standards on depository institutions? A. Depository Institutions Deregulation and Monetary Control Act B. Financial Institutions Reform, Recovery, and Enforcement Act C. Secure and Fair Enforcement for Mortgage Licensing Act D. Riegle Community Development and Regulatory Improvement Act

B. Financial Institutions Reform, Recovery, and Enforcement Act

10. In the late 1960's, Congress created a number of agencies designed to address a struggling secondary market for residential mortgages. Which of the following organizations was developed primarily to guarantee mortgage-backed securities based on pools of FHA, VA and Rural Housing Service loans, rather than issue, buy or sell mortgages? A. Federal National Mortgage Association (Fannie Mae) B. Government National Mortgage Association (Ginnie Mae) C. Federal Home Loan Mortgage Corporation (Freddie Mac) D. Federal Agricultural Mortgage Corporation (Farmer Mac)

B. Government National Mortgage Association (Ginnie Mae)

2. To put into perspective the amount of residential mortgage debt outstanding, it is useful to compare this market to other prominent sources of available debt. Listing the issuer with the largest amount of debt outstanding first, which of the following choices best depicts the relative rank ordering amongst the major sources of outstanding debt in the U.S. as of the end of 2011? A. Residential mortgage debt, marketable U.S. government bonds, corporate bonds, consumer debt B. Marketable U.S. government bonds, residential mortgage debt, corporate bonds, consumer debt C. Corporate bonds, marketable U.S. government bonds, residential mortgage debt, consumer debt D. Consumer debt, residential mortgage debt, marketable U.S. government bonds, corporate bonds

B. Marketable U.S. government bonds, residential mortgage debt, corporate bonds, consumer debt

17. Suppose that a mortgage bank "locked in" an interest rate for a prospective borrower at 8.5%. However, prior to the loan closing, the market mortgage rate falls to 7.5 %. In this scenario, the mortgage banker would be most concerned with which of the following risks? A. Interest rate risk.  B. Pipeline fallout risk. C. Default risk. D. Liquidity risk.

B. Pipeline fallout risk.

13. In recent years, home equity loans have become a popular form of second mortgage. Their popularity has been a result of all of the following EXCEPT: A. Lower interest rates than other consumer debt B. Shorter terms than other consumer debt C. Tax-favored status D. Aggressive marketing by lenders

B. Shorter terms than other consumer debt

25. Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: A. Equity of redemption B. Statutory redemption C. Strategic default D. Substantive default

B. Statutory redemption

14. The difference between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. All of the following statements regarding power of sale are true EXCEPT: A. The power of sale treatment is faster than judicial foreclosure B. The foreclosed property is typically sold through a public auction administered by the court. C. It is less costly for power of sale to be employed than judicial foreclosure. D. Typically, lenders must give proper legal notice to the borrower, advertise the sale property, and allow a required passage of time before the sale.

B. The foreclosed property is typically sold through a public auction administered by the court.

9. The Federal Housing Administration (FHA) insures loans made by private lenders that meet FHA's property and credit-risk standards. Which of the following statements concerning FHA insurance is true? A. The insurance is paid by the lender and protects the lender against loss due to borrower default. B. The insurance is paid by the borrower and protects the lender against loss due to borrower default. C. The insurance is paid by the lender and protects the borrower against loss due to lender default. D. The insurance is paid by the borrower and protects the borrower against loss due to lender default.

B. The insurance is paid by the borrower and protects the lender against loss due to borrower default.

6. One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a "graduated" or step-up lease? A. The monthly rent remains fixed over the entire lease term. B. The lease establishes schedule of rental rate increases over the term of the lease. C. Rental rate increases are indexed to the general rate of inflation. D. Rental rates are a function of the sales of the tenant's business.

B. The lease establishes schedule of rental rate increases over the term of the lease.

19. Congress has enacted a number of regulations that have established criteria for evaluating home loan applicants and mandating disclosures in the origination of home loans. Which of the following congressional acts requires important disclosures concerning the cost of consumer credit, including the computation of the annual percentage rate (APR)? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Home Ownership and Equity Protection Act (HOEPA)

B. Truth-in-Lending Act (TILA)

8. The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as: A. operating expenses B. capital expenditures C. vacancy losses D. collection losses

B. capital expenditures

4. Created by Congress to promote an active secondary market for home mortgages, Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards such as loan size, documentation, and payment to income ratio. The loans that Fannie Mae and Freddie Mac are eligible to purchase are commonly referred to as: A. government sponsored loans B. conforming conventional loans C. nonconforming conventional loans  D. FHA loans

B. conforming conventional loans

4. The starting point in calculating net operating income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses. This is commonly referred to as:  A. effective Gross Income B. potential Gross Income C. operating expenses D. capital expenditures

B. potential Gross Income

16. When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not the subsequent owner of the property can preserve the loan. If the buyer does not add his or her signature to the note, the buyer does not take on any personal liability. In this case, the buyer is said to: A. assume the old loan B. purchase the property subject to the existing loan C. obtain the property through the use of a contract for deed. D. foreclose on the property

B. purchase the property subject to the existing loan

20. In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: A. rescinding B. redlining C. assuming D. holdout

B. redlining

1. Mortgage originators can either hold loans in their portfolios or sell them to investors. When a mortgage originator decides to sell mortgages to another institution, this transaction occurs in what is commonly referred to as the: A. primary mortgage market B. secondary mortgage market C. over-the-counter market D. loan origination market

B. secondary mortgage market

4. Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a: A. rate cap B. teaser rate C. payment cap  D. prepayment rate

B. teaser rate

18. A common criticism of the annual percentage rate (APR) is that it usually understates the true cost of borrowing. The APR may understate the cost of borrowing because it assumes: A. interest rates will always rise B. the loan always goes to maturity C. the actual life of the loan is shorter than maturity D. upfront fees should be ignored

B. the loan always goes to maturity

3. Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately: A. 75 basis points B. 175 basis points C. 275 basis points D. 375 basis points

C. 275 basis points

17. Since mortgages typically have multiple costs associated with them, a borrower may attempt to reduce these costs into a single measure in order to compare two or more mortgages. Which of the following measures is a popular tool for comparing the cost of several mortgages? A. Upfront fees B. Contracted interest rate C. Annual percentage rate D. Teaser rate

C. Annual percentage rate

14. Traditional home mortgage underwriting is said to rest on three elements, the "three C's." The housing expense ratio is one tool that lenders will use to address concerns associated with which of the "three C's?" A. Collateral B. Creditworthiness C. Capacity D. Capability

C. Capacity

15. The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business? A. Chapter 1 bankruptcy B. Chapter 7 bankruptcy C. Chapter 11 bankruptcy D. Chapter 13 bankruptcy

C. Chapter 11 bankruptcy

7. Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? A. Federal Housing Administration (FHA) loan B. Veterans Affairs (VA) loan C. Conventional home loan D. An assumable home loan

C. Conventional home loan

12. When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursuing a court supervised process of terminating all of the borrower's claims of ownership of the property, this is commonly referred to as: A. Bankruptcy B. Foreclosure C. Deed in lieu of foreclosure D. Equity right of redemption

C. Deed in lieu of foreclosure

5. For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? A. Yield-maintenance prepayment penalties B. Prepayment lockout C. Defeasance prepayment penalty D. Curtailment penalty

C. Defeasance prepayment penalty

6. Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums? A. Demand clause B. Insurance clause C. Escrow clause D. Exculpatory clause

C. Escrow clause

10. Federal Housing Administration (FHA) loans differ from conventional loans in a number of ways. All of the following statements regarding FHA loans are true EXCEPT: A. FHA loans are targeted toward first-time homebuyers who are in slightly weaker financial circumstances than the typical prime conventional borrower. B. FHA loans are more tolerant in terms of qualifying debt-to-income ratios C. FHA loans require higher credit scores than are needed for prime conventional loans. D. FHA loans contain lower limits on their maximum size than are available through conforming conventional loans.

C. FHA loans require higher credit scores than are needed for prime conventional loans.

2. Which of the following types of institutions has historically been the largest purchaser of residential mortgages? A. Commercial banks B. Savings and Loans C. Government sponsored enterprises D. Mortgage banking companies

C. Government sponsored enterprises

19. The refinancing decision is sometimes oversimplified into a few "rules of thumb" that a borrower uses in order to gauge its potential benefits. Which of the following methodologies is criticized for its inability to account for a variation in refinancing benefits due to cost or holding period differences? A. Payback period approach B. Net benefit approach C. Interest rate spread D. Net present value approach

C. Interest rate spread

12. The going-in cap rate, or overall capitalization rate, is a measure of the relationship between a property's current income stream and its price or value. Which of the following statements regarding cap rates is true? A. It is a measure of total return since it accounts for future cash flows from operations and expected appreciation (depreciation) in the market value of the property. B. It is a discount rate that can be applied to future cash flows. C. It is analogous to the dividend yield on a common stock. D. It is the projected rate at which prices will appreciate in the future

C. It is analogous to the dividend yield on a common stock.

15. Recently, mortgage banking has become the natural method for doing mortgage lending. Within the mortgage lending process, which of the following roles serves as the primary revenue source for mortgage banks? A. Loan commitment B. Loan funding C. Loan servicing D. Loan sales

C. Loan servicing

9. Operating expenses can be divided into two categories: variable and fixed expenses. Which of the following best exemplifies a fixed expense? A. Utilities B. Property management C. Local property taxes D. Trash removal

C. Local property taxes

2. A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the: A. one-year U.S. Treasury constant maturity rate B. prime rate C. London Interbank Offered Rate (LIBOR) D. cost-of-funds index

C. London Interbank Offered Rate (LIBOR)

17. When calculating the net operating income of a property, it is important to identify any expenses that will be incurred in attempts to maintain the property. All of the following would be considered operating expenses EXCEPT: A. Property taxes B. Property insurance premiums C. Mortgage payments D. Utility expenses

C. Mortgage payments

23. In recent years, mortgage lenders responded to the demand from home buyers who were unable to put 20 percent down on their purchase and were looking to avoid the private mortgage insurance (PMI) requirement that would typically accompany such a loan by developing a second mortgage that is created simultaneously with the first mortgage in an amount of ten percent of the value of the home. This enabled the borrower to obtain 90 percent financing while avoiding the additional cost of PMI. These loans are more commonly referred to as: A. Reverse mortgages B. Home equity loans C. Piggyback mortgage loans D. Subprime mortgage loans

C. Piggyback mortgage loans

24. When a borrower decides to stop making payments on an existing mortgage loan despite having the ability to make payments (typically when the home has lost value), this is more commonly referred to as a(n): A. Equity redemption B. Statutory redemption C. Strategic default D. Reverse mortgage

C. Strategic default

19. Despite many innovations in the lending process that made mortgage loans more accessible and affordable to the general public, many potential borrowers faced considerable barriers in qualifying for a loan and making a down payment. Which of the following types of loans was designed for a borrower with weak credit, those who seek 100 percent financing, or who cannot document their income? A. Conventional prime home loan B. Affordable housing loan C. Subprime mortgage loan D. Bridge loan

C. Subprime mortgage loan

5. In addition to providing home mortgages, large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market. This type of financing is commonly referred to as: A. Mortgage pipeline B. Loan servicing C. Warehousing D. Loan underwriting

C. Warehousing

13. Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT: A. Foreclosure is a costly process for all parties involved. B. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property. C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. . D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.

C. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property. .

7. In calculating net operating income, vacancy losses must be subtracted from the gross income collected. The normal range for vacancy and collection losses for apartment, office, and retail properties is: A. between zero and one percent B. between one and five percent C. between five and fifteen percent D. between fifteen and twenty percent

C. between five and fifteen percent

11. In the securitization process, mortgages are pooled together and cash flows are packaged into securities to be sold in the secondary market. Agencies and private companies that pool mortgages and sell mortgage-backed securities (MBS) are often referred to as: A. thrifts B. credit unions C. conduits D. automated underwriters

C. conduits

5. Since conforming loans can be much more readily bought and sold in the secondary mortgage market, they carry a(n) _______ interest rate than comparable nonconforming loans. A. higher B. equal C. lower D. more volatile

C. lower

21. Suppose a buyer agrees to purchase a tract of land for $40,000. The buyer is only able to obtain a mortgage for $32,000. Rather than let the deal fall through, the seller agrees to accept $4,000 in cash and a note from the buyer for the remaining $4,000. This type of transaction is commonly referred to as a: A. conventional loan B. home equity mortgage C. purchase money mortgage D. reverse mortgage

C. purchase money mortgage

15. When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's: A. net sale proceeds B. selling expenses C. terminal value D. current market value

C. terminal value

5. The distinction between market rent and contract rent is important due to differences in lease terms. Office, retail, and industrial tenants most commonly occupy their space under leases that run: A. one year or less B. one to three years C. three to five years D. ten years or more

C. three to five years

17. Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between: A. 1-5 years B. 5-7 years C. 7-15 years D. 15-30 years

D. 15-30 years

11. Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? A. One day B. 30 days  C. 60 days D. 90 days

D. 90 days

8. Mortgage insurance rates vary with the perceived riskiness of the loan. Which of the following scenarios would result in a higher mortgage insurance premium?  A. Lower loan-to-value ratio B. Shorter loan term C. Stronger credit record of the borrower D. A "cash-out" refinancing loan

D. A "cash-out" refinancing loan

27. If a homeowner in mortgage distress owes more than the value of the home, and is unable make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT: A. Legal costs should be lower with a short sale than with foreclosure B. A short sale usually enables a better sale price and a faster sale than foreclosure C. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

D. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

1. In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan.

D. An unambiguous description of the property that is being pledged as collateral for the loan.

26. In an attempt to regulate home mortgage lending after the mortgage crisis of 2007, which of the following acts created an independent oversight agency tasked with the responsibility of overseeing and enforcing Federal consumer financial protection laws, enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or abusive acts or practices, receiving consumer complaints, promoting financial education, and watching for emerging financial risks for consumers? A. Equal Credit Opportunity Act (ECOA) B. Truth-in-Lending Act (TILA) C. Real Estate Settlement Procedures Act (RESPA) D. Dodd-Frank Wall Street Reform and Consumer Protection Act

D. Dodd-Frank Wall Street Reform and Consumer Protection Act

13. For smaller income-producing properties, appraisers may use the ratio of a property's selling price to its effective gross income. This is an example of a: A. Net operating income B. Going-out cap rate C. Going-in cap rate D. Gross income multiplier

D. Gross income multiplier

20. With the arrival of subprime mortgages in recent years, a new kind of "trigger" event became apparent in leading households to default. Which of the following trigger events is primarily associated with most defaults that have occurred during the most recent subprime mortgage crisis? A. Death in the family B. Divorce C. Unemployment D. Mortgage payment spikes

D. Mortgage payment spikes

13. In the modern framework of home mortgage lending, there are four channels by which first mortgage home loans are created. Within which of the following channels would you typically find a Wall Street investment bank obtaining loans, pooling loans, and creating a senior-subordinate security structure? A. Traditional direct (portfolio) lending B. FHA/VA loan securitization C. Conforming conventional loan securitization D. Nonconforming Conventional loan securitization

D. Nonconforming Conventional loan securitization

18. The cap rate is an important metric that investors use to analyze the state of commercial real estate markets. When interpreting cap rate movements, an increase in cap rates over time would indicate that: A. The discount rate used in TVM (time value of money) calculations has increased B. The discount rate used in TVM (time value of money) calculations has decreased C. Property values have increased D. Property values have decreased

D. Property values have decreased

12. Many older, retired households are considered "house poor." Which of the following forms of loans has been designed to help mitigate this problem by offering additional monthly income to these homeowners in exchange for a portion of their housing equity? A. Purchase-money mortgage (PMM) B. Piggyback Mortgage C. Home equity loan D. Reverse mortgage

D. Reverse mortgage

10. Which of these is most likely to be regarded as a capital expenditure rather than an operating expense? A. Property taxes B. Trash removal C. Insurance payments D. Roof replacement

D. Roof replacement

18. It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? A. Offer B. Acceptance C. Possession of the property passes to the buyer D. Title to the property passes to the buyer

D. Title to the property passes to the buyer

16. Mortgage loans made to borrowers with normal credit quality, but who lack the necessary documentation of their financial circumstances typically needed to meet conforming mortgage standards would most likely be considered: A. subprime loans B. option ARM loans C. hybrid ARM loans D. alt-A loans

D. alt-A loans

8. Throughout the process of originating and selling mortgages, mortgage companies face a number of risks. Therefore, it is important for a lending institution to evaluate the risks of mortgage loan default through a process commonly referred to as: A. mortgage fallout B. loan servicing C. warehousing D. loan underwriting

D. loan underwriting

10. In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the: A. broker B. mortgagor C. agent D. mortgagee

D. mortgagee

8. Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: A. fully amortizing B. partially amortizing C. nonamortizing D. negatively amortizing

D. negatively amortizing

16. When using discounted cash flow analysis for valuation, an appraiser will prepare a cash flow forecast, often referred to as a: A. restricted appraisal report B. net operating income statement C. direct market extraction D. pro forma

D. pro forma

22. The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following? a. Defeasance b. Yield Maintenance Provision c. Demand Clause d. Lockout Provision

Lockout Provision