Fin 355 Exam 1

Prepayment penalties increase the lender's mortgage yield and discount points decrease it. T/F

False

Pro-ration involves a professional who rates the quality of the property. T/F

False

Someone with a credit score of 900 is likely to only qualify for a subprime loan. T/F

False

The APR for a loan assumes it is prepaid after ten years. T/F

False

The APR for an adjustable rate mortgage loan is an accurate measure of the actual cost of funds to the borrower. T/F

False

The annual percentage rate, disclosed at the loan closing, closely approximates the borrower's true cost of funds. T/F

False

The calculated APR usually represents the true costs of financing. T/F

False

The default risk of a FRM is higher than the default risk of an ARM. T/F

False

The future value of a $1 annuity compounded at 5% annually is greater than the future value of a $1 annuity compounded at 5% semi-annually. T/F

False

The internal rate of return is the good feeling you get inside when you earn a return on your investment. T/F

False

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and monthly payments. What portion of the first month's payment would be applied to interest?

$1,042

A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year 3 monthly payment be?

$1,067

A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4%, after that, the rate can reset with a 5% annual payment cap. On the reset date, the composite rate is 6%. What would the Year 3 monthly payment be?

$1,186

If you deposit $1,000 in an account that earns 5% per year, compounded annually, you will have $1,276 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?

$1,283

A borrower has secured a 30 year, $150,000 loan at 7% with monthly payments. Fifteen years later, an investor wants to purchase the loan from the lender. If market interest rates are 5%, what would the investor be willing to pay for the loan?

$118,478

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%. What would the monthly payment be?

$1,342

Using only the information in the table above, approximately how much would you pay today for an investment that pays $0 annual interest, but earns 8% interest over the next four years and has a face value at maturity of $13,500?

$10,000

Mr. Fisher has built several houses and is offering buyers mortgage rates of 10% with 15 year term. Current rates are 10.75%. Fourth National Bank will provide the loans, if Mr. Fisher pays an equivalent amount up front to buy down the interest rate. If a house is sold for $290,000 with a 90% loan, how much would Mr. Fisher have to pay to buy down the loan?

$10,790.41

A loan was made 10 years ago for $140,000 at 10.5% for a 30 year term. Rates are currently 9.25%. What is the market value of the loan?

$139,828

Your friend has a trust fund that will pay him $100,000 at the end of 10 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 20% interest rate on money you lend to friends. How much would you be willing to lend under these terms?

$16,151

A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 6% and monthly payments. If she wants to pay off the loan after 8 years, what would be the outstanding balance on the loan?

$175,545

Assume that the loan in the previous question allowed for negative amortization. What would be the outstanding balance on the loan at the end of Year 3?

$192,337

A house is sold with an assumable $156,000 below-market loan at 8.5% for a remaining term of 15 years. Current rates are 9.75% for 15 year mortgages. If the house sold for $240,000, what is the cash-equivalent value of the house.

$229,165.18

A property is encumbered as follows: (A) First mortgage, A: $250,000 Second mortgage, B: $40,000 Third mortgage, C: $10,000 How much can mortgagee B pay for the property at a foreclosure sale without having to raise additional funds?

$290,000

Your friend just won the lottery. He has a choice of receiving $50,000 a year for the next 20 years or a lump sum today. The lottery uses a 15% discount rate. What would be the lump sum your friend would receive?

$312,967

At the end of 8 years, your friend wants to have $50,000 saved for a down payment on a house. He expects to earn 8%—compounded monthly—on his investments over the next 8 years. How much would your friend have to put in his investment account each month to reach his goal?

$374

Homeowners should not borrow refinancing costs because the effective rate of refinancing will be higher. T/F

False

A borrower obtains a $150,000 reverse mortgage with monthly payments over 10 years. If the interest rate of the mortgage loan is 8%, what is the monthly payment received by the borrower?

$820

Which loan in the above table should have the lowest initial interest rate?

(A) Loan 1

With which loan in the above table does the lender have the lowest interest rate risk?

(A) Loan 1

Which of the following statements about the loan in the question above are TRUE?

(A) The market value of the loan is higher than the book value of the loan because the market rate of interest is lower than the interest rate on the loan

Which loan in the above table is a FRM?

(B) Loan 2

Which of the following is FALSE concerning buydown loans? (A) They are often used during periods of high inflation (B) They always lower the rate on the loan for the borrower for the entire loan term (C) Help borrowers qualify for a loan (D) They can be offered by home builders

(B) They always lower the rate on the loan for the borrower for the entire loan term

Under which scenario is negative amortization likely to occur?

(C) 7.5% Increasing

Which mortgage would a borrower prefer to have during inflationary and recessionary periods?

(C) CPM CAM

Which of the following descriptions most accurately reflects the risk position of an ARM lender in comparison to that of a FRM lender?

(D) Lower Higher

Which of the following statements regarding negative amortization in the previous question is true?

(D) The Year 3 payments are more than the interest assessed on the loan, so the outstanding balance at the end of Year 3 is lower than at the end of Year 2.

Inflation makes very little difference to lenders of and investors needing money. T/F

False

The APR estimate must be accurate only to the nearest ___ percent

1/8

When purchasing a $210,000 house, a borrower is comparing two loan alternatives. The first loan is a 90% loan at 10.5% for 25 years. The second loan is an 85% loan for 9.75% over 15 years. Both have monthly payments and the property is expected to be held over the life of the loan. What is the incremental cost of borrowing the extra money?

12.42%

A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money?

13.66%

Use the information in problem 1, except assume that the loan will be repaid in 5 years. What is the incremental cost of borrowing the extra money?

13.95%

Ms. Madison has an existing loan with payments of $782.34. The interest rate on the loan is 10.5% and the remaining loan term is 10 years. The current balance of the loan is $57,978.99. The home is now worth $120,000 and Ms. Madison would like to borrow an additional $30,000 through a wraparound loan which would increase the debt to 487,978.99. Terms of the wraparound loan are 12.25% interest with monthly payments for 10 years. What is the incremental cost of borrowing the extra $30,000 through a wraparound loan?

15.47%

It is a federal law that a mortgage must be recorded to be valid. T/F

False

A house is for sale for $250,000. You have a choice of two 20-year mortgage loans with monthly payments: (1) if you make a down payment of $25,000, you can obtain a loan with a 6% rate of interest or (2) if you make a down payment of $50,000, you can obtain a loan with a 5% rate of interest. What is the effective annual rate of interest on the additional $25,000 borrowed on the first loan?

18.67%

A typical RESPA closing statement contains which of the following characteristics?

2 columns - summary of borrower's and seller's transactions

A borrower has secured a 30 year, $150,000 loan at 7% with monthly payments. Fifteen years later, the borrower has the opportunity to refinance with a fifteen year mortgage at 6%. However, the up front fees, which will be paid in cash, are $2,500. What is the return on investment if the borrower expects to remain in the home for the next fifteen years?

28.89%

Ten years ago, you put $150,000 into an interest-earning account. Today it is worth $275,000. What is the effective annual interest earned on the account?

6.25

A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 4 points. What is the effective annual interest rate on the loan if the loan is carried for all 30 years?

6.4%

A borrower made a mortgage loan 7 years ago for $160,000 at 10.25% interest for 30 years. The loan balance is now $151,806.62 and rates for this amount are currently 9.0% for 23 years. Origination fees and closing costs are $4,500 and closing costs are not financed by the lender. What is the effective cost of refinancing?

8.95%

A deposit placed in an interest-earning account earning 8% a year will double in value in ___ years.

9

Bud is offering a house for sale for $180,000 with an assumable loan which was made 5 years ago for $140,000 at 8.75% over 30 years. Kelsey is interested in buying the property and can make a $20,000 down payment. A second mortgage can be obtained for the balance at 12.5% for 25 years. What is the effective cost of the combined loans, if Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?

9.39%

It is illegal to give a quitclaim deed if the grantor has no claim in the property. T/F

False

Which is NOT a component of an ARM? (A) A margin (B) An index (C) A chapter (D) Caps

A chapter

Which of the following is not a basic component of any compounding problem?

A net present value

A "short sale" of real estate is:

A sale in which the proceeds from the sale are less than the balance owed on the loan secured by the property sold

A historical summary of the publicly-recorded documents that affect the ownership of a property is know as a(n):

Abstract of title

The Acceleration Clause says notice of all, but which of the following must be given to the mortgager?

Acceleration of debt secured by the mortgage has taken place because of default

Which of the following clauses leads to higher risk for an ARMs lender?

Adjustment interval is longer than one year

Given that every other factor is equal, which of the following ARMs will have the lowest expected cost?

An ARM with no caps or limitations

Which of the following is FALSE regarding a tax sale? (A) An accurate and complete description of the property is required to be posted for possible purchasers before the sale (B) The property owner may not have had a court appearance through due process, thus creating a cloud on the title (C) The line of authority for the sale may not be clear (D) The purchaser is usually expected to pay all delinquent taxes at the time of sale

An accurate and complete description of the property is required to be posted for possible purchasers before the sale

Junior liens are eliminated by a voluntary conveyance of a property to the mortgagee. T/F

False

If an investment earns 12% annually:

An equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return

APR stands for which of the following?

Annual percentage rate

Negative amortization reduces the principal balance of a loan. T/F

False

In order to calculate the APR for an ARM, you must,

Assume the worst case scenario and use interest rates at their highest possible point over the life of the loan

Which of the following terms refers to the prohibition of the commencement or continuation of collection proceedings during a bankruptcy proceeding?

Automatic stay

Using only the information in the table above, what would the IRR be for an investment that cost $500 in period 0 and was sold for $750 in period 5?

Between 8% and 9%

A reversion and a remainder are similar in that

Both can be sold or mortgaged

One of the objectives of RESPA was to disclose kickbacks and unearned fees on the settlement sheet. T/F

False

The internal rate of return: -Is also known as the investment of investor's yield -Represents a return on investment expressed as a compound rate of interest -Is calculated by setting the price of an investment equal to the stream of cash flows it generates and solve for the interest rate

Can be defined by all of the above

One way to calculate the present value of a single payment is with the following formula: PV = FV * (1+i)^n T/F

False

Over the life of the loan, which of the following loans would continually have a lower principal balance given each loan had the same term, principal amount, and average interest rate?

CAM

Origination fees are tax deductible as an interest expense. T/F

False

Which of the following types of bankruptcy is available to a business to reorganize and rehabilitate the debtor?

Chapter 11

Which of the following types of bankruptcy is filed with the end result of liquidating the debtor's assets?

Chapter 7

Which of the following is typically NOT one of the financing costs associated with the financing of real estate?

Closing fees

If an ARM index increased 15%, the negative amortization on a loan with a 5% annual payment cap is calculated by:

Compounding the difference between the payment as if no cap existed and the 5% capped payments

PLAMs have been very popular with lenders. T/F

False

Prepayment of a loan without penalty is a right of all borrowers. T/F

False

One of the first amortizing mortgages was the constant amortization mortgage. Which of the following characterized the components of the CAM payment over the life of the loan?

Decreasing Constant Decreasing

What legal document conveys title from one person to another?

Deed

Demand for a mortgage loan is considered:

Derived demand

For a loan with an LTV greater than 80 percent, the costs of mortgage insurance always exceed the costs of second lien financing. T/F

False

General industry standards for a conventional loan specify a maximum LTV of 60 percent. T/F

False

Mr. Smith has allowed Mrs. Jones to run a sewer line through Mr. Smith's backyard so that Mrs. Jones has access to the city sewer system. This is an example of a(n):

Easement

An escrow account:

Ensures that a default insurance policy does not lapse if a borrower is in danger of default

Graduated payment mortgage are loans available to people who have graduated from college. T/F

False

Home equity loans do not require a mortgage lien on the property. T/F

False

The future value of $1,000 compounded annually for 8 years at 12% may be calculated with the following formula: FV = $1,000 * (1 + 12%)8 If the same $1,000 was compounded quarterly, what formula would you use to calculate the FV?

FV = $1,000 * (1 + 3%)^32

Which of the following default is LEAST often used for foreclosure?

Failure to keep the security in repair

A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. A second loan can be obtained at 15% so the borrower would be better off by borrowing with the smaller loan and a second mortgage. T/F

False

A borrower is considering refinancing and finds that the return, considering refinancing charges and lower payments, is 10%. The borrower can earn 12% on alternative investments so the property should be refinanced. T/F

False

A clause which specifies that the mortgagee will obtain and maintain property insurance is typically included in a mortgage. T/F

False

A house that is financed with a below-market loan is available for sale. The value of the house will be higher than similar properties regardless of the other terms of the loan. T/F

False

A loan with biweekly payments will have more interest than a monthly loan with the same interest rate and loan term. T/F

False

A major benefit of a PLAM is the mortgage payment increases closely following borrower salary increases. T/F

False

A mortgage is the same thing as a note. T/F

False

A non-recourse loan is one in which the borrower is personally liable for payment of all amounts due under the terms of the note. T/F

False

A potential buyer is interested in purchasing a home that has an assumable below-market loan. The buyer determines that the financing premium associated with the below-market loan is worth $4,300. If similar houses sell for $100,000, the buyer should be willing to pay $104,300 or more for the property. T/F

False

A purchaser at a tax sale receives a deed to the property at the time of the sale.

False

A remainder cannot be mortgaged. T/F

False

ARMs eliminate all the lender's interest rate risk. T/F

False

ARMs were developed because lenders were tired of offering a limited selection of loan alternatives to borrowers. T/F

False

After a house is purchased, contractors cannot ask the new owner of the house to pay any bills that were outstanding before the house was sold. T/F

False

Assume that an investment, with an single initial cost of $1,000 and a yield of $50 monthly for 10 years, had a 7% IRR in the 60th month and a 7.2% IRR five months later. The IRR can be 6.8% in the 62nd month. T/F

False

At 6%, the present value of a $1 payment in 12 months is .941905. At 7%, the present value of a $1 payment in 12 months is .950342. T/F

False

Determining a loan balance on a CPM is a simple future value of an annuity problem. T/F

False

FTL requires that the lender disclose an estimated cost of financing within three days of loan application. T/F

False

Financing costs are usually paid by the lender to either the borrower/buyer or the seller. T/F

False

The term real estate refers to the ownership rights associated with the physical land and improvements. T/F

False

To protect themselves from loss due to default, most lenders require borrowers to acquire hazard insurance policies. T/F

False

Truth-in-lending requires the borrower to tell the truth on the loan application. T/F

False

Under lien theory, title and the right to possession pass from the mortgagor to the mortgagee when the mortgage is executed. T/F

False

When a purchaser takes a property "subject to" an existing mortgage, the purchaser becomes personally liable for repaying the debt. T/F

False

With every CPM, the effective costs of borrowing are higher than the stated rate of the loan. T/F

False

You always see an ordinary annuity used in business and never see an annuity due used in business. T/F

False

A(n) ___ estate represents the most complete form of ownership of real estate; the owner is free to divide it up into lesser estates and sell, lease, or borrow against them as he or she wishes.

Fee simple

What term BEST describes a person that owns a property and is conveying title to the property to another person?

Grantor

What type of estate lasts for an indefinite period of time?

Freehold estate

f you saw a table containing the following factors, what kind of interest factor would you be looking at?

Future value of a single amount

Because its payment stream looks like a staircase, which loan is sometimes referred to as "stepped-up" financing due to prearranged payment increases?

GPM

Which type of deed offers the grantee the MOST protection?

General warranty deed

In jurisdiction where a deed of trust is used to finance real estate, there are three parties to the loan secured by the deed of trust. Which of the following is NOT one of those three parties? (A) Borrower (B) Trustee (C) Holder of the note (D) Grantor

Grantor

Which of the following statements is FALSE regarding foreclosure? (A) In judicial foreclosure, property subject to attachment and execution is limited to the mortgaged property (B) If the sale of the mortgaged property realizes a price above the claims of the mortgage and expense of the sale, the balance goes to the mortgagor (C) Redemption can be accomplished by paying 95% of the debt, interest and costs due to mortgage (D) All of the above

If the sale of the mortgaged property realizes a price above the claims of the mortgage and expense of the sale, the balance goes to the mortgagor

Risk is an important component of interest rates. Which of the following risks is NOT a determinant of interest rates? (A) Default risks (B) Interest rate risks (C) Institutional risks (D) Marketability risks

Institutional risks

Begin with a single sum of money at period 0. First, calculate a future value of that sum at 12.01%. Then discount that future value back to period 0 at 11.99%. In relation to the initial single sum, the discounted future value:

Is greater than the original amount

In comparison to the first month's payment of a CAM, the first month's payment of a CPM:

Is lower

Which of the following is TRUE regarding the incremental cost of borrowing?

It should be compared to the cost of obtaining a second mortgage

Which of the following documents conveys title to a property at the time the purchaser completes the performance of the obligation called for in the document?

Land contract

Which of the following is FALSE concerning Mechanic's Liens? (A) Gives the right to attach a lien on real estate (B) Can get money through forcing judicial sale (C) Lasts even after the bill for labor and materials has been paid (D) Might not be disclosed by the public records

Lasts even after the bill for labor and materials has been paid

Points are also known as:

Loan discount fees

When calculating the cash equivalent value of an assumable loan, you find the present value of the payments using the:

Market interest rate

A conforming loan:

Meets loan limits of loans that Fannie Mae and Freddie Mac can buy

Which of the following is the main objective of FTL legislation?

More informative disclosure of the cost of credit

RESPA has three specific objectives. Which of the following is NOT one of those objectives? (A) More effective advance disclosure of settlement costs (B) More informative of the cost of credit (C) Elimination of kickbacks and unearned fees (D) A reduction in the amount of escrow placed in accounts for homeowners

More informative of the cost of credit

A mortgage is BEST defined as a legal document that:

Names real estate as the security or collateral for the repayment of a loan

The expected cost of borrowing does NOT depend on which of the following provisions? (A) The frequency of payment adjustments (B) The inclusions of caps and floors on the interest rate, payment or loan balances (C) The spread over the index chosen for a given ARM (D) None of the above

None of the above

RESPA requires lenders to disclosure to buyers a uniform settlement statement detailing all closing costs within

One day before the real estate closing

A loan in which the borrower arranges in advance with a total amount that will be advanced in stages, such as a construction loan is said to have which type of mortgage loan:

Open-end

At the end of five years, calculating the loan balance of a constant payment mortgage is simply the:

Present value of an ordinary annuity

Which of the following solutions is LEAST likely to be acceptable to a mortgagee when discussing alternatives to foreclosing a property? (A) Permanently extending the amortization period (B) Finding someone else to assume the mortgage (C) Providing a temporary grace period during which principal and interest are not paid (D) Permanently reducing the interest rate

Permanently reducing the interest rate

Assuming all APRs equal, the effective interest rate on a loan is highest when

Points are charged and the loan has a 30 year maturity but prepaid in five years

Which of the following is NOT a minimum mortgage requirement? (A) Description of the property (B) Covenant of warranty (C) Prepayment clause (D) Covenant of seizing

Prepayment clause

What is usually executed at the same time as a mortgage and creates the obligation to repay the loan in accordance with its terms?

Promissory note

In some cases, lenders require that borrowers obtain default insurance. The purpose of such insurance is to:

Protect the lender from losses associated with borrower default on the loan

A conforming mortgage is one for which the US Treasury will provide credit backing. T/F

True

Which of the following is NOT an alternative to foreclosure? (A) Restructuring the mortgage loan (B) Transfer of the mortgage to a new owner (C) Redemption (D) Prepackaged bankruptcy

Redemption

A mortgage agreement provides the lender with ________ interests.

Secured

If a lender is to repossess or bring about the sale of a property if the borrower defaults on the mortgage loan, the lender is said to have a ___ in the real estate.

Secured Interest

Which of the following is NOT a good method of title assurance? (A) Seller provides a warranty in the deed (B) An attorney searches recorded documents (C) Title insurance is purchased (D) Seller provides a quitclaim deed

Seller provides a quitclaim deed

Which of the following is typically NOT one of the settlement costs that are escrowed over the life of the loan?

Selling commissions

Which of the following terms refers to an owner's right to redeem a property after foreclosure? A) Equity of redemption (B) Statutory redemption (C) Attachment (D) Execution

Statutory redemption

If one of the terms of an ARM read, interest is capped at 2%/5%, what would that mean?

The interest rate has a 2% annual cap rate and a 5% lifetime cap rate

A jumbo loan:

Tends to have a higher interest rate than conforming loans

Which of the following groups customarily does NOT attend real estate closing?

The buyer's and seller's immediate families

Which of the following is NOT a determinant of interest rates for single family residential mortgages? (A) The demand and supply of mortgage funds (B) Inflation expectations (C) Liquidity (D) The demand and supply of apartments

The demand and supply of apartments

Which of the following is TRUE concerning Wraparound Loans?

The lender makes payments on existing loan

A senior mortgage holder is owed a mortgage balance of $140,000 and brings a foreclosure suit which includes all junior claimants in the suit. If the senior mortgage holder purchases the property for $140,000 at the foreclosure sale, what happens to the claim of the junior claimants?

The liens of the junior claimants are extinguished, but the debt owed to the junior claimants is unaffected

The market value of a loan is

The present value of the remaining payments

Which of the following is a disadvantage of PLAMs?

The price level used to index PLAMs is measured on an ex post basis and historic prices may not be an accurate reflection of future price.

Payment to income ratio is BEST described as:

The ratio of the expected payments on a property to the income of the borrower

Which of the following situations is NOT a common cause for the use of a purchase-money mortgage? (A) The buyer cannot come up with the down payment needed to qualify for a mortgage (B) The seller wants to receive the gain from the sale in installments (C) Third-party mortgage financing is too expensive of unavailable (D) The seller desires to artificially raise the price of the property by receiving a higher-than-market interest rate

The seller desires to artificially raise the price of the property by receiving a higher-than-market interest rate

What document usually summarizes the sources, disbursements, charges and credits associated with a real estate closing?

The settlement statement

Which one of the following is TRUE about Prepayment penalties

They are not included in the APR calculation

When is seller financing NOT used?

Third-party mortgage financing is less expensive or easily available

RESPA requires lenders to disclose to buyers a good faith estimate of certain closing costs within:

Three days after loan application

Which of the following closing costs do not increase the lender's effective loan yield?

Title insurance charges

A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. The borrower can earn 12% on alternative investments of comparable risk so he would be better off by not borrowing the extra 14%. T/F

True

A clause which specifies that the mortgagor will pay all property taxes and other charges assessed against the property, even if theses charges have priority over the mortgage is typically included in a mortgage. T/F

True

A due on sale clause which specifies that the mortgage can accelerate the debt if the property is sold without the mortgagee's permissions is a typical clause in a mortgage document. T/F

True

A fee simple estate is a type of freehold estate T/F

True

A fee simple estates is a type of freehold estate. T/F

True

A mortgage default can result from failure to pay property taxes. T/F

True

A quitclaim deed says that the grantor "quits" whatever claim he has in the property in favor of the grantee. T/F

True

A reciprocal easement agreement allows two or more parties to access each other's property. T/F

True

A residential real estate closing involves two actual closings: the loan closing and the sales transaction closing. T/F

True

A second mortgage is a junior lien mortgage that is sometime used to bridge the gap between the price of a property and the sum of the first mortgage and down payment. T/F

True

A technical default can result from failure to keep the property in repair. T/F

True

ARMs help lenders combat unanticipated inflation changes, interest rate changes, and a maturity gap. T/F

True

An investment may have more than one internal rate of return. T/F

True

As compared to other types of deeds, a general warranty deed provides the most comprehensive warranties about the quality of the title to the property. T/F

True

Borrowers with fixed rate mortgages generally benefit if actual inflation is higher than expected inflation. T/F

True

Buydown loans have initial payments that are lower than they would be without the buydown provision. T/F

True

Characteristics of a PLAM include an increasing mortgage payment and an adjusting loan balance tied to an index. T/F

True

Determining the APR for federal truth-in-lending purposes is more complicated for a adjustable rate mortgage loan is more difficult than for a fixed rate mortgage loan. T/F

True

FTL and RESPA essentially say the same things. T/F

True

If a debtor, under Chapter 7 bankruptcy, is not behind on his mortgage payments, he does not have the give up the property. T/F

True

If interest rates decrease, the market value of a loan previously make will increase. T/F

True

In order to solve a compounding problem, you must know all four of the variables in order to solve for the fifth variable. T/F

True

Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index. T/F

True

Lenders and investors worry about default, interest rate, marketability, and liquidity risks. T/F

True

One difference between the constant amortizing mortgage (CAM) and the constant payment mortgage (CPM) is the interest paid and loan amortization relationship. With a CAM, the loan amortization and interest paid are directly related and with the CPM the loan amortization and the interest paid are inversely related. T/F

True

RESPA requires a lender to disclose good faith estimates of closing costs within three days of loan application. T/F

True

Real estate refers to the physical land and improvements constructed on the land. T/F

True

Real property refers to the ownership rights associated with real estate. T/F

True

The Federal Housing Administration (FHA) provides mortgage insurance, but does not make loans. T/F

True

The cash equivalent value of a house that sold with favorable financing is usually less than its sale price. T/F

True

The effective cost of a wraparound loan should be comparable to the cost of a second mortgage with the same loan-to-value ratio. T/F

True

The floor of an ARM is the maximum reduction of payments or interest rates allowed. T/F

True

The future value of $800 deposited today would be greater if that deposit earned 8% rather than 7.75%. T/F

True

The process of confirming a plan of reorganization under Chapter 11, even if one or more creditor classes dissent, is known as a "cramdown."

True

Title insurance protects the buyer from title claims against the property. T/F

True

Unless stated otherwise, the borrower is personally liable for payment of all amounts due under the terms of the note. T/F

True

When a deed is given in lieu of foreclosure of the mortgage, the mortgagor no longer has an obligation to pay the mortgage note. T/F

True

With a reverse mortgage the borrower receives payments from the bank. T/F

True

Which of the following is NOT typically included in housing costs used to calculate a borrower's payment-to-income ratio?

Utilities

The future value compound factor given for period (n) at 15%:

Would be less than the factor for period (n+1) at 15%