Chapter 9 Quizzes and Tests
Q: Melissa is buying Raymond's house. Melissa's loan amount is $88,750. She has agreed to pay 2 points at closing. How much will Melissa pay for points? (9447)
A: $1,775.00. [CORRECT] Explain: $88,750 x .02 = $1,775. Remember, one point = 1% of the loan amount.
Q: Tina is buying Terrell's house for $187,500. The broker's commission, to be paid by the seller, is 6%. How much will Terrell pay the broker? (9457)
A: $11,250.00 [CORRECT] Explain: $187,500 x 6% = $187,500 x .06 = $11,250.
Q: A sale transaction closes on April 1, the ninety-first day of the tax year. The day of closing belongs to the seller. Real estate taxes for the year, not yet billed, are expected to be $2,190. According to the 365-day method, what is the seller's share of the tax bill? (9444)
A: $546.00. [CORRECT] Explain: The daily tax expense, first, is ($2,190 ˜ 365) or $6.00. Since the buyer will pay the taxes after closing, the seller will owe the buyer his or her portion of the tax bill, which is the 91 days from the beginning of the year through closing. Therefore, credit the buyer and debit the seller ($6.00 x 91), or $546.00.
Q: A seller received a rental payment of $900 in advance. At closing, the seller has earned only $320 of this rent. What should appear on the closing statement? (9465)
A: A debit to the seller and credit to the buyer for $580. [CORRECT] Explain: For income the seller received in advance, the buyer receives a credit and the seller receives a debit. In effect, the seller has received some of the buyer's income, and the seller must pay this share to the buyer. Therefore the seller is debited and the buyer is credited the $580 the buyer is entitled to earn as the new owner.
Q: What are "tenant improvements?" (9055)
A: Alterations to a rental space made to fit a particular tenant [CORRECT]
Q: Most mortgage loans are required to use (11918)
A: Closing Disclosure Form H-25. [CORRECT] Explain: For any loans subject to the TILA-RESPA rule that are federally-related mortgage loans subject to RESPA (which will include most mortgages), Closing Disclosure Form H-25 is the standard form. This means that creditors must use the form H-25.
Q: Which agency administers RESPA? (11939)
A: Consumer Financial Protection Bureau (CFPB) [CORRECT] Explain: The Real Estate Settlement Procedures Act (RESPA) of 1974 was created to ensure that the buyer and seller in a residential real estate transaction involving a new first mortgage loan have knowledge of all settlement costs. The Act is administered by the Consumer Financial Protection Bureau (CFPB).
Q: Who is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan? (12000)
A: Creditor [CORRECT] Explain: The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan.
Q: Which of the following items would not be found at the top of the first page on the loan estimate? (11948)
A: Estimated Closing Costs [CORRECT] Explain: Date issued, Applicants and Property Address are just three of the identifying information items that are located at the top of the application. Estimated closing costs is not one of these items.
Q: Which of the following is a common risk relating to the agency relationship? (9424)
A: Failing to inform and disclose properly. [CORRECT] Explain: Agency risks commonly concern the requirement to inform and disclose. Most states require agency relationships to be in writing and to be disclosed to all parties to a transaction. In states that do not use agency, there is still the obligation to explain and disclose the nature of the relationship.
Q: Under the TILA-RESPA rule, how long must a creditor retain copies of the closing disclosure documents? (11899)
A: Five years after consummation [CORRECT] Explain: TILA-RESPA rule § 1026.25 states that a creditor must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for five years after consummation.
Q: AJAX Mortgage Service writes four home loans per year. What type of paperwork must AJAX use? (11889)
A: GFE, HUD-1 settlement, and TIL disclosures [CORRECT] Explain: Loans made by creditors who make five or fewer mortgages per year should continue to use the GFE, HUD-1 settlement, and TIL disclosures for these types of loans.
Q: What kind of agency is commonly created by a management agreement? (9450)
A: General [CORRECT] Explain: Property managers are usually considered to be general agents empowered to perform some or all of the ongoing tasks and duties of operating the property, including the authority to enter into contracts.
Q: How does documentation manage risk? (8291)
A: It serves as evidence that laws have been complied with. [CORRECT]
Q: Regardless of the loan type, which pages of the Closing Document remain the same? (11931)
A: Pages 2 and 3 Explain: Pages 2 and 3 will always look the same, regardless of the loan type.
Q: What is it called when a Closing Disclosure error is detected after loan consummation? (12006)
A: Post-consummation event [CORRECT] Explain: When a post-consummation event requires a corrected Closing Disclosure, the creditor must deliver or place in the mail a corrected Closing Disclosure not later than 30 calendar days after receiving information sufficient to establish that such an event has occurred.
Q: Which of the following items are paid in arrears? (8059)
A: Taxes and interest [CORRECT]
Q: What section of the Closing Disclosure does the consumer sign to give notice of receipt of the form? (11986)
A: The Confirm Receipt section [CORRECT] Explain: The Confirm Receipt section is a place for the borrowers to sign confirming receipt of the Closing Disclosure document.
Q: Which of the following is one of the three conditions that must be met that allows a consumer to waive or modify the three-business-day waiting period? (11975)
A: The extension of credit is needed to meet a bona fide personal financial emergency. [CORRECT] Explain: An extension of credit is needed to meet a bona fide personal financial emergency is one of the three conditions needed to allow a consumer to waive or modify the three-business-day waiting period.
Q: A certain item is to be prorated between a buyer and seller. If no outside party is concerned, which of the following statements is true? (9420)
A: The item must be prorated and recorded as a debit to one party and a credit to the other party for the same amount. [CORRECT] Explain: An income or expense item that affects both parties is apportioned, or prorated, to each party to reflect the proper amount that each owes or should receive. A prorated item is treated as a debit to one party and a credit to the other party for the same amount.
Q: Which of the following describes a net lease? (9062)
A: The tenant pays a base rent plus some or all of the operating expenses. [CORRECT]
Q: A management agreement establishes a(n) (9060)
A: agency relationship. [CORRECT]
Q: Which of the following statements is most accurate? (11921)
A: an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies certain conditions. Explain: In general, the amount imposed on the consumer for any settlement service must not exceed the amount the settlement service provider actually received for that service. However, an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies certain conditions.
Q: One of a manager's common environmental responsibilities is (9056)
A: arranging for environmental audits. [CORRECT]
Q: An item is said to be paid in arrears if it is normally paid (9445)
A: at some time after the expense is incurred. [CORRECT] Explain: Items paid in arrears are paid after the expense has been incurred.
Q: Transaction records required to be maintained typically include (8294)
A: closing statements. [CORRECT]
Q: One of the principal concerns for a manager in selecting a commercial tenant is (9053)
A: compatibility of the tenants business with that of other tenants. [CORRECT]
Q: Documentary stamps are used to (8062)
A: document the payment of a transfer tax. [CORRECT]
Q: One of the major risk areas in fulfilling a listing agreement is (9440)
A: exceeding the authority of the agreement. [CORRECT] Explain: Licensees must stay within the bounds of the authority granted by the agency agreement and avoid doing anything requiring permission without first getting that permission in writing.
Q: One of the major risk areas in advertising a listed property is that an advertisement will (9456)
A: make a substantial misrepresentation. [CORRECT] Explain: The license laws of most states list as illegal advertising activities subject to discipline such actions as making any substantial and intentional misrepresentation, making false promises, and making misleading or untruthful statements in any advertising.
Q: A certain building has a vacancy rate above that of the general market. The most likely reason for this is (9052)
A: poor management. [CORRECT]
Q: If a propertyG??s vacancy rate is significantly lower than market rates, it may be a sign that the manager needs to (9436)
A: raise rental rates. Explain: Vacancy rates are directly related to demand and competitive supply in the market. If vacancy rates in the managed property are too high, the manager may have to lower rates or identify problems in the property or its management that are contributing to vacancy level. On the other hand, if the property's vacancy rate is significantly lower than market rates, the manager may conclude that higher rental rates are called for.
Q: Which of the following loans are not covered under the TRID Rule? (11951)
A: reverse mortgages Explain: Closings that do not require compliance to the TRID Rule include reverse mortgages.
Q: Of the following actions, the only one which avoids any risk of committing unintentional misrepresentation is (9449)
A: stating that a client should seek legal counsel. [CORRECT] Explain: Unintentional misrepresentation occurs when a licensee unknowingly gives a consumer inaccurate information concerning a property, financing or agency service. Information that the licensee, as a professional, should have known to be false or inaccurate may be included in the definition. Telling a client that legal counsel would be advisable is not misrepresentation and, in fact, is often an important risk management technique.
Q: The area of agent activity where there is the greatest risk of failing to maintain client confidentiality is (9448)
A: the agency relationship. [CORRECT] Explain: Maintaining the confidentiality of any information that would harm the clientÆs interests or bargaining position or anything else the client wishes to keep secret, unless the law requires disclosure, is one of the primary duties of agency. The duty to maintain confidentiality generally survives the termination of a listing agreement into perpetuity.
Q: What a buyer has to pay at closing is equal to (9423)
A: the excess of the buyer's debits over the buyer's credits. [CORRECT] Explain: To determine how much money the buyer owes at closing, the buyer's debits are totaled and compared with the total of the buyer's credits. The excess of debits over credits is the amount the buyer must bring to the closing.
Q: If an apartment contains a refrigerator that is not included in the lease, (9453)
A: the property manager does not have to maintain it. [CORRECT] Explain: The lease should set forth items that are excluded or included in the leased property. For instance, a residential lease may include built-in appliances such as dishwashers but exclude freestanding ones, such as refrigerators. At issue for the landlord is the cost of maintenance. If a refrigerator is not included, it does not have to be maintained by the property manager.
Q: If an apartment contains a washer and drier that are included in the lease, (9063)
A: the property manager is responsible for maintaining them. [CORRECT]
Q: It is important for tenants to understand that (9058)
A: their personal belongings are not covered by their landlordG??s insurance policies. [CORRECT]
Q: To reduce the risk of committing an error or omission in the contracting process, it is a good idea to (9425)
A: use a checklist of all items, contingencies, dates and responsibilities that must be met. [CORRECT] Explain: One way to reduce risk in the contracting process is to use a checklist that covers all the contract items, such as inclusions and exclusions, contingency periods, documents, forms, data checking, and milestone dates.
Q: Which of the following is one of the three conditions that must be met that allows a consumer to waive or modify the three-business-day waiting period? (11999)
Explain: If the consumer has received the Closing Disclosure, he or she may waive or modify the three-business-day waiting period, provided two additional conditions have been met.
Q: If a seller paid $488 for transfer taxes at closing, and the rate was $1.00 for every $400 or fraction thereof of the sale price, what was the sale price? (8065)
A: $195,200 [CORRECT]
Q: Assume a seller at closing must pay transfer taxes at the rate of $1.00 for every $500 of purchase price, or fraction thereof. If the sale price is $345,600, how much tax must the seller pay? (8064)
A: $692 [CORRECT]
Q: On what page of the Loan Disclosure form would you find exact figures for the loan amount, interest rate, and monthly principal and interest payment with indications as to whether any of those amounts can increase after closing? (12010)
A: 1 [CORRECT] Explain: Page 1 gives the exact figures for the loan amount, interest rate, and monthly principal and interest payment, and indicates with a "yes" or "no" whether any of those amounts can increase after closing.
Q: What information is under the Security interest heading on the Closing Disclosure form? (11985)
A: Address of the property securing the loan [CORRECT] Explain: The security interest section lists the address of the property securing the loan.
Q: Under which of these conditions can a loan estimate be revised? (11898)
A: The consumer requests revisions. [CORRECT] Explain: Creditors are bound by the Loan Estimate and may not issue revisions because they later discover technical errors, miscalculations, or underestimations of charges. TRID allows a creditor to provide a revised Loan Estimate, if the consumer requests revisions.
Q: What is the purpose of the new TRID Rule? (11886)
A: To simplify and improve disclosure forms for mortgage transactions [CORRECT] Explain: The new TRID Rule was issued to simplify and improve disclosure forms for mortgage transactions.
Q: Failure to maintain client confidentiality is a risk associated primarily with (8297)
A: the agency relationship. [CORRECT]
Q: When a revised Loan Estimate is mailed or delivered electronically, the consumer is considered to have received it (11970)
A: three business days after it is delivered or placed in the mail. [CORRECT] Explain: When a revised Loan Estimate is mailed or delivered electronically, the consumer is considered to have received it three business days after it is delivered or placed in the mail. However, if the creditor has evidence that the consumer received the revised Loan Estimate earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date.
Q: The waiting periods and timing requirements applicable to most loans subject to the TILA-RESPA Rule are inapplicable to loans secured by (11993)
A: timeshare interests. [CORRECT] Explain: The waiting periods and timing requirements applicable to most loans subject to the TILA-RESPA Rule are inapplicable to loans secured by timeshare interests. Rather, creditors must ensure only that the consumer receives the Closing Disclosure no later than consummation.
Q: Section J of the Loan Estimate gives the (11974)
A: total closing costs to the borrower. [CORRECT] Explain: Section J gives the total closing costs to the borrower. This total is the same as what appears at the bottom of page 1 under the heading "Estimated Closing Costs."
Q: The risk of committing an unauthorized practice of law can be practically reduced by (8293)
A: using standard forms and contracts prepared by attorneys. [CORRECT]
Q: Waldo is buying Marianne's house. The closing date (day belongs to seller) of the sale transaction is September 1 (day 244 of the year). Current Year real estate taxes are $1,100 (will be billed to buyer next year). Use the 365-day method for prorating. What is Marianne's share of the real estate taxes? (9460)
A: $735.34. [CORRECT] Explain: Assuming a 365 day year, the daily tax expense is ($1,100 ˜ 365), or $3.013. As taxes are paid in arrears, the buyer will be paying the annual bill. Thus, he will be owed a credit for the seller's share of the bill, which is $3.013 x 244 days, or $735.34.
Q: Charges for certain services and fees paid by or imposed on the consumer are grouped together and subject to a (11943)
A: 10% cumulative tolerance. [CORRECT] Explain: Charges for certain services and fees paid by or imposed on the consumer are grouped together and are subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%.
Q: How many pages is the Closing Document? (11930)
A: 5 [CORRECT] Explain: The Closing Disclosure is a five-page document.
Q: What does the 10% cumulative tolerance mean under the TRID Rule? (11894)
A: A creditor may charge the consumer more than the amount disclosed on the Loan Estimate for certain charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%. [CORRECT] Explain: Charges for certain services and fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%.
Q: Which of the following changes before consummation do not require a new waiting period? (11923)
A: A walk-through discovery [CORRECT] Explain: A walk through discovery would not require an additional three-business-day waiting period. The creditor must ensure only that the consumer receives the revised Closing Disclosure at or before consummation.
Q: When must a lender provide a loan applicant a copy of the Special Information Booklet? (11890)
A: At the time of application for a loan [CORRECT] Explain: Loan applicants must get a copy of the "Special Information Booklet" at the time of application for a loan.
Q: What are the record retention requirements if the creditor transfers or sells the loan? (11900)
A: Both the creditor and such owner or servicer must retain the Closing Disclosure for the remainder of the five-year period. Explain: If a creditor sells, transfers, or otherwise disposes of its interest in a mortgage and does not service the mortgage, the creditor must provide a copy of the Closing Disclosure to the new owner or servicer of the mortgage as a part of the transfer of the loan file. Both the creditor and such owner or servicer must retain the Closing Disclosure for the remainder of the five-year period.
Q: How are projected payments on a fixed rate loan shown? (11934)
A: Calculations are given for years 1-7 and then for years 8-30 of the loan term. [CORRECT] Explain: The Projected Payment section of page 1 shows the actual payments the borrower will make for principal & interest and mortgage insurance, an estimated amount for the escrow payment, and the total estimated monthly mortgage payment. These calculations are given for years 1-7 and then for years 8-30 of the loan term.
Q: What is the loan term that allows the creditor to require early repayment if the consumer defaults on payments? (11984)
A: Demand feature [CORRECT] Explain: A demand feature allow the lender to require early repayment in the event of a default in loan payments.
Q: The Closing Disclosure form integrates and replaces the (11913)
A: HUD-1 settlement statement and the final Truth in Lending (TIL) disclosure for mortgage transactions. Explain: The Closing Disclosure form integrates and replaces the HUD-1 settlement statement and the final Truth in Lending (TIL) disclosure for mortgage transactions.
Q: Which of the following fees do NOT fall under the zero tolerance rules? (11944)
A: Recording fees [CORRECT] Explain: Recording fees fall under the 10% cumulative tolerance rule, not the zero tolerance rule.
Q: Which of the following statements is TRUE regarding the TRID Rule? (11888)
A: Requires that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. [CORRECT] Explain: The TRID rule requires that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan.
Q: In which risk management strategy does a party take full responsibility for consequences and enter into an activity in spite of known risks? (8290)
A: Retention [CORRECT]
Q: What are the three kinds of maintenance a manager has to carry out for a managed property? (9437)
A: Routine, preventive, and corrective [CORRECT] Explain: The foremost maintenance objective is generally to preserve the value of the physical asset for the owner over the long term. Three general types of maintenance are required to keep a property in serviceable condition: routine (day-to-day), preventive (scheduled), and corrective (repairs and replacements).
Q: Initial Escrow Payment at Closing can be found in what section on the Loan Estimate? (11950)
A: Section G [CORRECT] Explain: Section G. Initial escrow payment at closing - An escrow account is an account where money is held for certain payments until they are paid out -typically for insurance and taxes.
Q: Lender Hopkins makes about 15 mortgage loans per year, what type of loan forms should he use? (11952)
A: TRID Rule forms [CORRECT] Explain: Loans made by creditors who make six or more mortgages per year are required to use TRID Rule forms.
Q: Which of the following statements is correct? (11965)
A: The Loan Estimate must be given within three business days after application, and the Closing Disclosure must be given three business days before closing. [CORRECT] Explain: The TRID Rule replaced the GFE, HUD-1, and TIL forms with two new forms: the Loan Estimate, given within three business days after application, and the Closing Disclosure, given three business days before closing.
Q: Which entity is responsible for ensuring that the Closing Disclosure meets the content, delivery, and timing requirements outlined by the TRID Rule? (12001)
A: The creditor [CORRECT] Explain: The creditor also is responsible for ensuring that the Closing Disclosure meets the content, delivery, and timing requirements outlined by the TRID Rule.
Q: The Universal Residential Landlord-Tenant Act (9066)
A: aims to clarify imprecise language in residential leases. [CORRECT]
Q: The purpose of the closing event is to (8052)
A: exchange legal title for the sale price. [CORRECT]
Q: For charges subject to zero tolerance, the creditor (11945)
A: must refund to the consumer any amount charged beyond the amount disclosed on the Loan Estimate. [CORRECT] Explain: For charges subject to zero tolerance, the creditor must refund to the consumer any amount charged beyond the amount disclosed on the Loan Estimate.
Q: If the Closing Disclosure is provided in person, it is considered received by the consumer (11920)
A: on the day the creditor provides it. [CORRECT] Explain: If the Closing Disclosure is provided in person, it is considered received by the consumer on the day the creditor provides it.
Q: The area of agent activity where there is the greatest risk of creating a false impression that the licensee is a certified appraiser is (9428)
A: performing a comparative market analysis. [CORRECT] Explain: In preparing a Comparative Market Analysis, licensees should guard against using the terms ôappraisalö and ôvalue,ö which are reserved for the use of certified appraisers. Misuse of these terms could lead to a charge of misrepresenting oneself as an appraiser.
Q: Commercial fire and hazard insurance policies usually require coverage to equal at least 80 percent of the propertyG??s (9431)
A: replacement value. [CORRECT] Explain: The amount of coverage provided by certain types of policies may be based on whether the property is insured at depreciated value or current replacement value. Depreciated value is original value minus the loss in value over time. Current replacement value, which is more expensive, is the amount it would cost to rebuild or replace the property at current rates. Commercial policies include coinsurance clauses requiring the insured to bear a portion of the loss. Fire and hazard policies usually require the coverage to be in an amount equal to at least 80 percent of the replacement value.
Q: The TRID Rule was issued to (11964)
A: simplify and improve disclosure forms for mortgage transactions. [CORRECT] Explain: The new TRID Rule was issued to simplify and improve disclosure forms for mortgage transactions.
Q: If a sale contract indicates that the day of closing is "the seller's day," this means that (8061)
A: the seller must pay prorated expenses inclusive of the day of closing. [CORRECT]
Q: How many pages is the form H-25(I) Mortgage Loan Transaction Closing Disclosure - Modification to Closing Disclosure for Disclosure Provided to Seller? (12008)
A: 2 [CORRECT] Explain: As noted in the TILA RESPA Integrated Disclosure form sample, the H-25(I) Mortgage Loan Transaction Closing Disclosure - Modification to Closing Disclosure for Disclosure Provided to Seller is two pages.
Q: Creditors must provide a revised Closing Disclosure to correct non-numerical clerical errors and document refunds for tolerance violations no later than (11926)
A: 60 calendar days after consummation. [CORRECT] Explain: Creditors must provide a revised Closing Disclosure to correct non-numerical clerical errors and document refunds for tolerance violations no later than 60 calendar days after consummation.
Q: A buyer will receive a water bill for an estimated $100 at the end of the month. At closing, the seller has used an estimated $43 in water. What should appear on the closing statement? (9443)
A: A debit to the seller and credit to the buyer for $43. [CORRECT] Explain: For an item the buyer will pay in arrears, the buyer receives a credit and the seller receives a debit. In effect, the seller has incurred some of the expenses that the buyer will be paying for after closing. Thus the seller must pay the buyer the used portion of the expense, or $43.
Q: To reduce risks inherent in reporting transaction progress to a client, the licensee should (9455)
A: avoid statements of opinion and speculation in all reports. [CORRECT] Explain: Progress reports should be accurate, timely, in writing, and free of speculation. Speculation may encourage the consumer to believe the agent has expertise that in fact is non-existent. If a consumer has a question about the meaning of something in an inspection report, the licensee should refer the consumer to the person who wrote the report rather than trying to explain it.
Q: A licensee risks violating antitrust law by (9426)
A: being present at a conversation where the setting of commission rates is discussed. [CORRECT] Explain: Antitrust laws forbid brokers to band together to set a price on their services in listing and selling property. Even being overheard discussing commission rates or being present at such a conversation can lead to charges of price fixing.
Q: Trust funds to be handled by a property manager are likely to include all of the following except (9435)
A: cash for the management firmG??s operating expenses. [CORRECT] Explain: Managers are responsible for proper handling of monies belonging to other parties (trust funds) that come into the manager's hands in the course of doing business. For property managers, such trust funds include rents collected from tenants, security deposits, and capital contributions from the property owner. Funds belonging to the management firm must not be commingled with those of the client
Q: A basic responsibility of a landlord is to (9434)
A: deliver a habitable property. [CORRECT] Explain: The landlord (by way of the property manager), is expected to deliver a property that is habitable. This means keeping heating, plumbing, cooling, and electrical systems in good repair as well as maintaining serviceability of floors, stairways, railings, roofs, and windows.
Q: To avoid violating the Real Estate Settlement Procedures Act, parties who are providing services to the buyer or seller in a transaction must (9464)
A: disclose in writing any business relationships they have with other parties involved in the transaction. [CORRECT] Explain: Business relationships and affiliations among real estate firms, mortgage brokers, title insurance firms and other such companies that are involved in a transaction are permitted, provided the relationships are disclosed in writing to the consumer, the consumer is free to go elsewhere for the relevant service, and the companies do not exchange fees for referrals.
Q: Effective gross income is defined as (9454)
A: revenue from all sources minus losses from uncollected rents, vacancies, and evictions. [CORRECT] Explain: The total of scheduled rents plus revenues from such sources as vending services, storage charges, late fees, utilities, and contracts is the potential gross income. Subtracting losses caused by uncollected rents, vacancies and evictions gives effective gross income.
Q: What is the Internal Revenue Service's Form 1099-S? (8063)
A: A form that summarizes and reports transaction data from a closing [CORRECT]
Q: What kind of coverage is provided by general liability insurance? (8295)
A: Coverage for a property owner's risks incurred when the public enters the insured premises. [CORRECT]
Q: What is the first piece of information entered in the Closing Information section of the Closing Disclosure? (11932)
A: Date issued [CORRECT] Explain: The date issued is the first piece of information entered at the top left-hand side of the form.
Q: A good way of reducing the risk that brokers and sales affiliates will commit errors or inadvertent law violations is to (8292)
A: maintain a comprehensive and up-to-date procedures manual. [CORRECT]
Q: The standard E & O policy covers damages resulting from (9462)
A: negligence, error or omission in carrying out professional services. [CORRECT] Explain: A standard E&O policy provides coverage for damages resulting from any negligent act, error or omission arising out of Professional Services.ö It does not cover dishonest or illegal acts, including environmental violations and mishandling of funds.
Q: If the creditor cures a tolerance violation by providing a refund to the consumer, the creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund (11927)
A: no later than 60 calendar days after consummation. Explain: If the creditor cures a tolerance violation by providing a refund to the consumer, the creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than 60 calendar days after consummation.
Q: Fair housing laws are easily violated. An effective way for agents to minimize the risk of doing so is to (9441)
A: obtain education in the content and intent of the laws. [CORRECT] Explain: The risk of violating fair housing laws can be minimized through ongoing education that addresses both the intent of the laws and their current content..
Q: When a revised Loan Estimate is provided in person, it is considered received by the consumer (11968)
A: on the day it is provided. [CORRECT] Explain: When a revised Loan Estimate is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received it three business days after it is delivered.
Q: The conditions of an escrow agreement cannot be met and the related transaction cannot be completed. In such a case, the escrow agent (9446)
A: returns funds to the buyer. [CORRECT] Explain: If for any reason the transaction cannot be completed, the escrow instructions usually provide a mechanism for reconveying title to the seller and funds to the buyer. In such a case, both parties return to their original status as if no sale had occurred.
Q: Typically, pest inspections and survey fees are (11935)
A: services that the consumer can shop for themselves. [CORRECT] Explain: Pest inspections and survey fees are examples of items the borrower can get on his own.
Q: If a creditor provides a corrected disclosure, (11977)
A: the creditor is still required to comply with the three-business-day waiting period prior to consummation. [CORRECT] Explain: If the creditor provides a corrected disclosure, it may also be required to provide the consumer with an additional three-business-day waiting period prior to consummation.
Q: The amount a buyer owes at closing is equal to (8057)
A: the excess of the buyer's debits over the buyer's credits. [CORRECT]
Q: Which of the following items are paid in advance? (8060)
A: Rents and insurance [CORRECT]
Q: After the creditor receives a consumer's loan application, what is the timeframe the creditor has to provide the consumer with a written list of services for which the consumer is permitted to shop? (11897)
A: 3 days [CORRECT] Explain: If the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame—that is, it must be provided to the consumer no later than three business days after the creditor receives the consumer's application.
Q: If a creditor cures a tolerance violation by providing a refund to the consumer, the creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than (11994)
A: 60 calendar days after consummation. [CORRECT] Explain: If the creditor cures a tolerance violation by providing a refund to the consumer, the creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than 60 calendar days after consummation.
Q: Which of the following is classified as a change that requires a corrected Closing Disclosure to be issued? (11992)
A: Changes that occur before consummation and do not require a new three-business day waiting period require a creditor to issue a corrected Closing Disclosure. Explain: Changes that occur before consummation and do not require a new three-business day waiting period require a creditor to issue a corrected Closing Disclosure.
Q: Which of the following loans are covered by the TILA-RESPA rule? (11969)
A: Closed-end consumer credit transactions secured by real property [CORRECT] Explain: The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. However, some specific categories of loans are excluded from the rule. Specifically, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property.
Q: In what section of the Closing Disclosure would you find information regarding the firm names, addresses, license numbers, contact names, email addresses, and phone numbers for persons involved in the transaction? (11995)
A: Contact Information [CORRECT] Explain: Page 5 (fixed rate loans) includes a Contact Information section that lists firm names, addresses, license numbers, contact names, email addresses, and phone numbers for persons involved in the transaction.
Q: What type of information is found on page 2 of the Closing Disclosure (Fixed rate loan) in column 2? (11998)
A: Costs paid by the borrower - designated as being paid either "at closing" or "before closing" [CORRECT] Explain: Column 2 states the costs paid by the borrower - designated as being paid either "at closing" or "before closing".
Q: In what section of the Disclosure would you find information whether or not there is a prepayment penalty or balloon payment with the loan? (11933)
A: Loan Terms [CORRECT] Explain: In the Loan Terms section of page 1 you will find the exact figures for the loan amount, interest rate, and monthly principal and interest payment. It also indicates whether or not there is a prepayment penalty or balloon payment with the loan, and if so, gives the specifics that apply to that feature.
Q: In which section of the Loan Estimate form will your find exact figures for the loan amount, interest rate, and monthly principal and interest payment with indications of whether or not any of those amounts can increase after closing? (11905)
A: Loan Terms [CORRECT] Explain: The loan terms section of page 1 gives the exact figures for the loan amount, interest rate, and monthly principal and interest payment, and indicates with a "yes" or "no" whether any of those amounts can increase after closing. It also indicates whether or not there is a prepayment penalty or balloon payment with the loan, and if so, gives the specifics that apply to that feature.
Q: On the Annotated Version of the Blank Loan Estimate form, what are the two options for the "rate lock section?" (11904)
A: No or Yes [CORRECT] Explain: No or Yes are the two options regarding a rate lock on the loan.
Q: In what section of the Loan Estimate would you find information regarding whether the lender intends to service the loan or transfer servicing to another entity? (11911)
A: Other Considerations [CORRECT] Explain: In "Other Considerations" under "Servicing" you will find information indicating whether the lender intends to service the loan or transfer servicing to another entity.
Q: Depending on the type of loan the borrower is receiving, which pages could look different, if any? (12007)
A: Pages 1, 4, and 5 will look different. [CORRECT] Explain: The Closing Disclosure is a five-page document. Depending on the type of loan the borrower is receiving, pages 1, 4, and 5 of the disclosure could look different. Pages 2 and 3 will always look the same, regardless of the loan type.
Q: What section on the Closing Disclosure would indicate whether or not a lender will accept partial payments on the loan? (11983)
A: Partial payments [CORRECT] Explain: The partial payments section of the Loan Disclosures on page 4 indicates whether or not the lender will accept partial payments on the loan.
Q: For purposes of providing the Closing Disclosure, the term business day means all calendar days except (12002)
A: Sundays and the legal public holidays. [CORRECT] Explain: The term "business day" has a different meaning for purposes of providing the Closing Disclosure than it does for purposes of providing the Loan Estimate. For purposes of providing the Closing Disclosure, the term business day means all calendar days except Sundays and the legal public holidays, such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.
Q: What does the Special Information Booklet say is the role of the Consumer Financial Protection Bureau? (11892)
A: The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. [CORRECT] Explain: As noted in the Special Information Booklet, The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.
Q: According to the TRID Rule, a creditor may use an average service charge if four conditions are met. Which of the following is one of those conditions? (11979)
A: The average charge is no more than the average amount paid for that service by or on behalf of all consumers and sellers for a class of transactions. Explain: The average charge is no more than the average amount paid for that service by or on behalf of all consumers and sellers for a class of transactions.
Q: According to the TRID Rule, a creditor may use an average service charge if four conditions are met. Which of the following is one of those conditions? (12003)
A: The creditor or settlement service provider uses the same average charge for every transaction within the defined class. [CORRECT] Explain: The creditor or settlement service provider uses the same average charge for every transaction within the defined class.
Q: What guidelines must a creditor follow when providing a loan secured by an interest in a timeshare? (11928)
A: The creditors must ensure only that the consumer receives the Closing Disclosure no later than consummation. [CORRECT] Explain: The waiting periods and timing requirements applicable to most loans subject to the TILA-RESPA Rule are inapplicable to loans secured by timeshare interests. Rather, creditors must ensure only that the consumer receives the Closing Disclosure no later than consummation.
Q: What does loan assumption mean? (11960)
A: The lender will allow the loan to be assumed by another party on the original terms. [CORRECT] Explain: Assumption deals with whether or not the lender will allow a loan assumption on a future sale or transfer of the property.
Q: Which of the following are examples of closing items not prorated between buyer and seller? (8058)
A: Title insurance and inspection fees [CORRECT]
Q: Which of the following statements best defines the concept of "changed circumstances affecting eligibility" for a loan? (11957)
A: When a consumer's eligibility is changed from information disclosed on the Loan Estimate [CORRECT] Explain: A creditor may provide and use a revised Loan Estimate if a changed circumstance affected the consumer's creditworthiness or the value of the security for the loan, and resulted in the consumer being ineligible for an estimated loan term previously disclosed.
Q: What special information booklet must be given to every person at the time of application for a loan? (11953)
A: Your home loan toolkit [CORRECT] Explain: All borrowers must be given the booklet titled "Your home loan toolkit."
Q: A prorated expense on the settlement statement is (8056)
A: a debit to one party and a credit to the other. [CORRECT]
Q: Consummation is defined under Regulation Z as the time that a (11954)
A: consumer becomes contractually obligated on a credit transaction. [CORRECT] Explain: Consummation is defined under Regulation Z as the time that a consumer becomes contractually obligated on a credit transaction.
Q: A creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to (11958)
A: consummation. [CORRECT] Explain: The creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to consummation. If the creditor is mailing the revised Loan Estimate and relying upon the 3 business day mailbox rule, the creditor would need to mail the Loan Estimate no later than seven business days before consummation of the transaction to allow 3 business days for receipt.
Q: Negative amortization (11996)
A: could result in the loan amount becoming larger than the original loan amount. [CORRECT] Explain: The negative amortization section indicates whether or not the loan has a negative amortization feature, which could result in the loan amount becoming larger than the original loan amount, resulting in a decrease of the equity the borrower has in the property.
Q: A creditor can issue a revised Loan Estimate (11967)
A: if the value of the security for the loan changes. [CORRECT] Explain: A creditor may provide and use a revised Loan Estimate if a changed circumstance affected the consumer's creditworthiness or the value of the security for the loan, and resulted in the consumer being ineligible for an estimated loan term previously disclosed.
Q: If a creditor provides a corrected disclosure, (11917)
A: it may also be required to provide the consumer with an additional three-business-day waiting period prior to consummation Explain: If the creditor provides a corrected disclosure, it may also be required to provide the consumer with an additional three-business-day waiting period prior to consummation. This is dependent on the nature of the changes.
Q: For timeshare loans, creditors (11929)
A: may forego a Loan Estimate and provide only the Closing Disclosure. [CORRECT] Explain: The Bureau thus adopted abbreviated timing, delivery, and disclosure obligations for these loans when consummation occurs within three business days of the application. For these loans, creditors may forego a Loan Estimate and provide only the Closing Disclosure.
Q: If the Closing Disclosure has an incorrect amount listed as the broker's real estate commission, the creditor (12005)
A: must provide a corrected Closing Disclosure, but is not required to wait an additional three-business days for the consumer receive and review it. [CORRECT] Explain: For this type of change, there is no additional three-business-day waiting period required. However, the creditor must ensure that the consumer receives the revised Closing Disclosure at or before consummation.
Q: If the actual terms or costs of the transaction change prior to consummation, the creditor (11976)
A: must provide a corrected disclosure that contains the actual terms of the transaction and complies with the other requirements of the TRID Rule. [CORRECT] Explain: If the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms of the transaction and complies with the other requirements of the TRID Rule, including the timing requirements and requirements for providing corrected disclosures due to subsequent changes.
Q: A sale contract stipulates that a buyer is to pay the seller's title insurance expenses. This practice is not customary in the area. In this case, (8055)
A: the buyer must pay the expense. [CORRECT]
Q: If the annual percentage rate (APR) previously disclosed becomes inaccurate, (11982)
A: the creditor must provide a corrected Closing Disclosure with the corrected APR disclosure and all other terms that have changed. [CORRECT] Explain: If the annual percentage rate (APR) previously disclosed becomes inaccurate, the creditor must provide a corrected Closing Disclosure with the corrected APR disclosure and all other terms that have changed.
Q: How is the consumer informed if he or she is permitted to shop for a settlement service? (11946)
A: the creditor must provide the consumer with a written list of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame Explain: In addition to the Loan Estimate, if the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame—that is, it must be provided to the consumer no later than three business days after the creditor receives the consumer's application.
Q: A buyer's financing arrangements are often concluded at closing, because (8053)
A: the lender wants to ensure proper handling of the collateral for the loan. [CORRECT]
Q: According to the Real Estate Settlement and Procedures Act, a uniform settlement statement must be used whenever (8054)
A: the loan is to be sold to the FNMA. [CORRECT]
Q: A creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than (11914)
A: three business days before consummation of the loan. [CORRECT] Explain: The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan.
Q: Standard E & O policies exclude coverage of damages resulting from (8296)
A: violations of law. [CORRECT]
