finance exam
1. One of the better criteria used to determine an applicant's stability of income is A. the amount of income in excess of that needed for approval B. the record of payment to other creditors C. the length of time on the job D. whether or not more than one applicant is liable
1. C
2. The percentage ratios used as guidelines in the qualification of an applicant's income by HUD/FHA are based on the applicant's A. effective income not reduced by taxes B. net effective income after deduction of both income and social security taxes C. net effective income reduced only by withholding tax D. net effective income reduced only by social security taxes
2. A
3. The VA residual qualification method determines an applicant's residual income, then measures that against the applicant's A. mortgage payment amount B. other shelter expenses C. other monthly obligations D. VA calculated cost of living expense
3. D
4. Which of the following best describes the purpose of a loan agreement as part of a corporate business loan? A. It details the terms of loan repayment B. Lender approval is needed for the company to undertake an expenditure that might jeopardized loan repayment C. To limit all corporate expenditures during term of the loan D. To provide additional collateral to secure the loan
4. B
15. The normal method to reach a final estimate of value in a narrative appraisal is A. an adjusted average of the approaches to value as determined by the judgment of the appraiser. B. whatever value is shown by the major approach. C. a mathematically determined average of all approaches. D. only the capitalized value as determined by the current market rate of return.
A
21. The sales comparison approach to value is most widely used for which of the following types of properties? A. Residential property B. Income producing property C. Buildings serving specialized purposes D. For transactions involving government agencies
A
28. A study that projects the potential success or failure of a proposed project is called: A. feasibility study B. an appraisal C. a pro forma study D. a future possibility study
A
31. Unlike the permanent loan, a construction loan usually requires the endorsement of the: A. Owner/builder B. Future tenants C. Landowner D. Mortgagee
A
37. In the financing of special purpose buildings, if a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to: A. agree to endorse the note B. agree to buy out the dealer C. re-write the sales agreement D. all of the above
A
43. The least amount of management is needed for operating: A. a warehouse B. a shopping center C. an office building D. an apartment
A
49. A home builder may offer the home buyer a lower-than-market interest rate because of purchasing a loan commitment A. True B. False
A
50. The loan to value ratio is a measure used by lenders for all the following purposes EXCEPT: A. to determine acceptability of the property as loan collateral B. as a basis for pricing the loan C. to determine the need for private mortgage insurance D. to protect against exceeding legal loan limits
A
64. Which of the following is NOT a loan classification with Freddie Mac's "Loan Prospector"? A. Rejected B. Accepted C. Refer D. Caution
A
66. Fannie Mae offers two automated underwriting programs, one called " Desktop Originator" that is for use: A. by an agent taking information on a laptop computer for transmittal to a seller/servicer who verifies and transmits the information to Fannie Mae B. to transmit information directly to Fannie Mae's Desktop Underwriter system C. prohibited to a real estate broker D. by any individual
A
70. The advantage of a web site offering mortgage loans is: A. an individual can obtain a mortgage loan without paying for or dealing with an agent or loan officer B. the availability of loans is very limited C. the cost is generally higher than with regular channels D. it is a time consuming procedure as careful analysis is needed.
A
80. The following is true of electromagnetic forces. A. Numerous testing has proven no direct relation between electromagnetic forces and cancer B. Real Estate agents should not answer questions on this subject C. Electromagnetic forces are a real cause of cancer D. Many diseases are facilitated by electromagnetic forces
A
85. The underlying purpose of RESPA requirements is to: A. require disclosures that give a buyer/borrower sufficient information to make informed decisions B. increase federal control over real estate deals C. introduce complex questions that necessitate employing legal counsel D. limit costs of closing a real estate transaction
A
93. All of the following charges involved with the settlement of a residential mortgage loan must be paid at time of closing EXCEPT: A. Prepaid principal B. Property taxes C. Hazard insurance premium D. Prepaid interest
A
95. The variance 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan if the Good Faith Estimate turns out to be off by more than the variance percentages established by which of the following new legislative actions? A. Mortgage Disclosure Improvement Act of 2008 B. American Recovery and Reinvestment Act of 2009 C. The Frank-Dodd Act of 2011 D. The Community Reinvestment Act
A
aning up toxic waste sites. A. True B. False 74. The purpose of a Phase I Assessment as defined by CERCLA is to A. determine if any prior use of the property would indicate the presence of environmental contamination B. examine the property for existing contamination only on the surface C. discover any existing contamination and determine methods of resolving the problem D. provide the landowner with absolute protection against any subsequent liability
A
12. The Home Affordable Modification Program main provision is that the modified mortgage payment will not exceed _______ percent of their verified monthly gross (pre-tax) income. A. 29 B. 31 C. 36 D. 41
B
14. Which of the following statements regarding certification of appraisers is correct? A. It is illegal to undertake an appraisal unless that person is properly certified B. Appraisers may be certified by each state as long as federal guidelines are adhered to C. Certified appraisers must be used for every loan whether or not the lender is federally related D. All appraisers with peer designations have been grandfathered into state certified status.
B
19. If the appropriate present worth factor is .90909 and it is applied to an income stream of $35,000, the discounted value would be A. $18,333 B. $31,818 C. $38,500 D. $66,818
B
23. Which FHA software technology allows a approved FHA seller/servicer to find a FHA approved appraiser? A. Desktop Underwriter B. FHA Connection C. Loan Prospector D. Uniform Appraisal Dataset
B
24. What is that the maximum time that an approved FHA Appraisers appraisal report is valid on construction loans A. 90 Days B. 120 Days C. 180 Days D. 1 year
B
27. A release clause in a real estate development loan agreement is one that: A. allows the borrower to withdraw from the agreement B. defines the conditions under which lots can be released from the mortgage for resale to builders C. calls for releasing collateral back to the lender D. triggers the release of a lender from any further participation in the loan
B
29. The top designation for a accountant preparing a financial statement is: A. Certified Management Accountant B. Certified Public Accountant C. Federal Approved Accountant D. Designated Accountant
B
32. A construction loan can include all of the following conditions EXCEPT: A. disbursement only after certain construction has been completed B. a release of that portion of the collateral on which disbursement of funds has been made C. a method of assuring the lender that money disbursed to a borrower/builder is used to pay a project's bills D. a requirement for periodic inspection to assure the lender that all plans and specifications are being met
B
39. The important reason that shopping center land loads encourage promotions of their tenant's sales is that: A. it fosters better relations B. shopping center leases are usually based on a percentage of the tenant's sales C. it attracts better tenants D. it encourages faster lease-up
B
41. One of the better ways to assure success with a high rise office building investment is to: A. pick a suit able location B. prelease as much space as possible, preferably to a major tenant C. obtain the best possible financing D. require that the building contractor be bonded
B
42. Which of the following is true of percentage leases? A. It is the dominant method to lease warehouse space B. The percentage charged varies with type of business C. Shopping centers have a standard percentage rate which is the same for all tenants D. All percentage leases allow for an annual change in the percentage charged
B
46. In analysis of a property's income and expense, the calculation of each item as a percentage of the gross operating income helps an analyst to: A. add paperwork to the analysis B. more accurately compare income and costs with those of other similar properties C. compare income and expense with each other D. determine if a rent increase is needed.
B
52. To create a land syndicate, the most common form of business organization used is the: A. syndicate itself B. limited partnership C. S Corporation D. land trust
B
53. If a builder holds an unsubordinated leasehold interest in land, it means that a building constructed on the land A. would pass to the landowner if the land rent is not paid B. would pass to the mortgagee if the land rent is not paid C. the builder would only forfeit ownership if the mortgage loan is not paid D. would remain in possession of the builder as long as the land rent if paid
B
56. Which of the following is NOT an acceptable procedure for proving title to land? A. An attorney's opinion based on research of an abstract B. An accurate survey made by a state-licensed surveyor C. Purchase of title insurance D. A Torrens registration system
B
62. An ownership interest of one percent or more between parties involved with a CLO operation is called a "controlled business arrangement" and must be: A. a required used of any affiliated company B. disclosed to any consumer C. prohibited to use an affiliated company D. at least a 25 percent discount given by an affiliated company
B
67. Which of the following is true about credit scoring? A. It is a new method of credit analysis B. It is a number compiled from credit records that show a person's creditworthiness C. It has no variation and can be the sole criteria for creditworthiness D. It is used only for analysis of car loans
B
7. The assistance given by a credit report to borrower qualification is primarily to: A. verify the applicant's place of residence B. show the applicant's payment record to other creditors C. confirm employment and banking relations D. disclose any liens against applicant's property
B
73. The $8.5 Billion Superfund was created for the purpose of relieving landowners from liability in cle
B
76. Lead poisoning can result from inhalation an/or ingestion of lead from all the following sources EXCEPT: A. Emissions from internal combustion engines B. Water passing through plastic pipes C. Powdering or blistering paint in place prior to 1978 D. Household dust and soil around a house
B
79. In many parts of the country, contaminated areas are being removed from the Superfund program allowing clean-ups to be accomplished and the land returned to useful activity under which of the following programs? A. Restoration program B. Brownfields program C. ASTM's transaction screen D. Contamination release program
B
81. Insurance companies no longer write any kind of environmental risk coverage. A. True B. False
B
83. Which of the following is NOT an economic reason for pursuing a Green Building design? A. Energy savings of up to 50% B. 69% fewer CO2 emissions C. Worker productivity increases up to 15% D. Up to 40% reduction in water use
B
87. The primary purpose of the Truth-in-Lending Act is to A. require full disclosure of the amount of the promissory note B. provide meaningful information to borrowers on the cost of consumer credit C. discourage excessive loan costs for consumers D. establish limits on the total charges a lender can assess for a loan
B
89. In a settlement procedure, prepaid interest is required for the time period from September 21 (date of closing) through September 30. What amount of prepaid interest is due for a loan of $200,000 at 5% interest? (Banker's year is 360 Days) A. $250.00 B. $277.78 C. $246.57 D. 208.33
B
9. The Act that prohibits certain types of discrimination in the granting of credit is the: A. Fair Credit Reporting Act B. Equal Credit Opportunity Act C. Real Estate Settlements Procedures Ace D. Fair Housing Act
B
90. After initial closing deposits have been made, RESPA limits the continuing escrow or reserve account cushion held by lenders on residential loans to which of the following? A. Not more than is reasonable and customary B. Not more than one sixth of the annual recurring charges C. Not more than one twelfth of the annual recurring charges D. No restrictions apply after the initial deposits have been made
B
11. The Federal Credit Reporting Acts primary provisions are to: A. make available to the mortgagor procedures for disputing accurate information on their credit report. B. create a rule that all credit report users provide a copy of the credit reports to the borrower. C. provide satisfactory procedures to ensure the confidentiality and accuracy of consumer credit information. D. allow practical procedures to deny credit to credit-worthy borrowers.
C
13. The underlying theories that support evaluation of a property are called: A. Approaches to value B. Qualification for designations C. Principles of appraisal D. Whatever local practices prevail
C
17. The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is: A. $120,000 B. $200,000 C. $240,000 D. $480,000
C
18. The kind of depreciation most closely associated with inadequate building design is A. Design inadequacy B. Physical deterioration C. Functional obsolescence D. External obsolescence
C
22. A condominium type of unit is more popular than a cooperative apartment unit because A. It generally provides more living space B. They are located in more desirable living areas C. Ownership rights in a condo permit resale without approval of others D. A greater number are available
C
25. An application for a commercial loan would include all of the following items EXCEPT: A. information on the applicant company and the individuals involved B. complete financial statements and property evaluation C. a statement of compliance with RESPA requirements D. projection of income to show source of loan repayment
C
30. Restating financial information on a standard form accomplishes which of the following? A. Adds billable hours to an accountant's fee B. Increases the amount of information that can be filed C. Makes comparisons easier and shows up missing information D. Makes a good impression on clients
C
33. Speculative financing of a construction loan for houses usually requires the borrower to arrange: A. for a pre-sale of all housed to be financed B. endorsement of the loan by the future homebuyers C. an acceptable take-out commitment D. a Builder with over $1 million in assets
C
35. Which of the following is not one of the more common risks of investing in commercial real estate contemplated by the mortgagee and mortgagor? A. Financial risk B. Liquidity risk C. Regulatory risk D. Management risk
C
45. Depreciation allowed for tax purposes is a percentage of the: A. total value of the land and buildings B. equity interest in the building C. total value of the building D. equity interest in the land
C
47. When seeking funding which of the following is not one kinds of information that a religious institution facilities lender might feel was key? A. Minimum of three years average adult worship attendance. B. Annual contributions from each of the largest 15 donors for the previous year (the names of the donors are not usually required). C. Annual salaries/income of ministerial staff D. Cash on hand in building fund
C
48. A stabilized income property is one in which the building has a longer operating history and is usually has a _____% or higher occupancy and is for sale by its current owner for varying reasons. A. 75 B. 80 C. 85 D. 90
C
5. An application for a commercial loan would include all the following items EXCEPT: A. information on the applicant company and the individuals involved B. complete Financial statements and property evaluation C. a statement of compliance with RESPA requirements D. projection of income to show source of loan repayment
C
51. Which of the following is a FALSE statement in regard to refinancing a home loan? A. Lenders are free to set their own requirements for refinancing a loan B. Income tax laws may affect the savings in refinancing C. A 2 percent reduction in interest rate is a profitable refinancing in every case D. A major problem is the appraised value of the property may be less than the balance due on the existing mortgage loan
C
55. While the Securities and Exchange Commission does not directly regulate real estate sales, it can become involved under which of the following circumstances? A. Whenever any sale of land is across state lines B. If it suspects mishandling of an escrow account C. If paper is sold for development without a specific commitment for conveyance of property D. A sale where payment is made by installment notes
C
59. The private mortgage insurance required by regulated depository financial institutions states that for residential mortgage loans with LTV's higher than _______%must have private insurance coverage. A. 75 B. 80 C. 85 D. 90
C
60. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was enacted to make it more __________________________________ A. difficult for unsecured creditors to obtain payments in Chapter 7 B. structured for lenders to obtain releases from Chapter 11 filings C. difficult for well off borrowers to file for Chapter 7 by having to go through a means test D. extends the 60 month payment settlement period for Chapter 13 to 72 months
C
61. The best explanation of computerized loan origination is: A. a loan application can be analyzed by computer and approved if justified B. information on a loan application can be stored for future use C. loan information can be transmitted via computer to an underwriter for analysis D. the computer lists all information required for loan analysis
C
65. Freddie Mac offers an "expedited" collateral assessment which means A. no appraisal is necessary B. must only assure that property exists C. a short appraisal at lender's option which may be completed within two hours D. it can only be used if property is in a recognized subdivision
C
68. Even though greatly diminished in market share subprime loans offer all of the following EXCEPT A. a higher profit margin if carefully made B. a market that has been shunned before high tech analysis allowed better selection for carefully documented loans C. greater depth of loan analysis has eliminated all risks D. an expansion of the loan market beyond higher quality "A" rated borrowers
C
71. Mortgage loan origination software must increasingly be compatible with: A. Microsoft Excel B. TurboTax C. Third party originator web portals D. Mortgagebot
C
72. Insofar as real estate transaction are concerned, all of the following are true about environmental issues EXCEPT A. most commercial transactions require an environmental site assessment before an agreement can be reached B. almost all commercial lenders require a site assessment before committing to a loan C. it is illegal to convey property that harbors hazardous materials. D. usage of the land may be restricted if certain environmental conditions are present
C
75. Which of the following statements is FALSE in regard to asbestos in a building? A. Ingestion of microscopic fibers can cause asbestosis, a noncancerous disease B. The real danger lies in loose, or "soft," asbestos not that occurring in hard form C. In all cases where asbestos is found, the EPA recommends immediate removal D. The EPA will accept an in-place management program rather than require removal of all asbestos
C
78. Regulation implementing the Endangered Species Act Define a "taking" as: A. abusing land that harbors an endangered species B. only if its habitat is destroyed C. killing an endangered species and/or damaging or destroying its habitat D. failure to report the presence of an endangered species
C
8. The source of repayment of a home loan is expected to come from: A. income derived from the property itself B. additional borrowing C. the personal income of the borrower D. other rental income
C
82. LEED stands for: A. Land Environmental Enforcement Department B. Local Energy Environment Disturbance Division C. Leadership in Energy & Environmental Design D. Lead Elements Encroachment Detection
C
84. Which of the following is a prohibited practice as defined by RESPA requirements? A. A listing broker splits the real estate commission with a selling broker B. A lender refuses to accept an insurance company for coverage even though requested by the borrower C. A seller requires the use of a specific title company as a condition of the sale D. A selling broker provides the buyer/borrower with assistance in obtaining a loan in return for a fee
C
88. Real estate settlement procedures for residential loans, including the required settlement statement, are regulated by the A. Office of Thrift Supervision B. Fannie Mae-Freddie Mac C. Department of Housing and Urban Development D. Federal Reserve Bank
C
92. In closing a real estate transaction, instructions on how the proceeds of a loan are to be disbursed are issued by the A. Closing agent B. Seller's agent C. Lender D. Trustee's Attorney
C
94. The Truth-in-Lending Act allows certain transactions to be rescinded by consumers; Transactions exempt from this right of rescission include which of the following residential mortgage transactions? A. Cash out refinance B. Reverse Annuity Mortgage C. Purchase Money Mortgage D. Home Equity Line of Credit
C
The private mortgage insurance carrier and the amount of insurance coverage required are determined by the: A. Mortgagor B. Seller C. Mortgagee D. Real Estate Agent
C
10. Which of the following conditions would allow a lender to ask questions about income received from child support? A. The lender suspects that all income has not been properly reported B. The children eligible for the support will be living in the home to be acquired C. The property to be acquired is located in a community property state D. The child support income is offered as a part of the money that will be used to repay the loan
D
16. The principle of appraising that considers the amount of value that may be added by an improvement is A. Substitution B. Anticipation C. Conformity D. Contribution
D
20. Which of the following types of legal description is most commonly found in urban areas? A. Geodetic or government survey B. Metes and Bounds C. General Survey D. Lot and Block
D
26. The financial statement most commonly used in preliminary examination of real property investment that show some detail on income and operating expenses is the: A. Balance Sheet B. Accrual Statement C. Profit and Loss Statement D. Operating Statement
D
34. The major difficulty in obtaining a raw land purchase loan is: A. the land is hard for the lender to inspect B. the value is difficult to determine C. it is not certain that its value will increase D. it produces no income while expenses like taxes and insurance continue
D
36. Failure to properly carrying forward approved work-in-place on the Mortgagors Draw Requisition occurs in which of the following type of mortgage loan? A. Single Family Conforming Loan B. FHA REO Property Loan C. Deed for Contract Loan D. Construction Loan
D
38. Multifamily housing must comply with a 1988 amendment to Fair Housing Act that adds which of the following to the prohibition against discrimination? A. Pets and other personality B. Elderly persons C. Citizenship and employment D. Familial status and handicapped
D
40. A "net lease" means which of the following? A. The tenant pays a net rent after deducting certain listed operating expenses B. The tenant pays rent based only on the net interior space under lease C. The tenant pays for all of its own services D. The tenant pays all maintenance and building operating expenses plus insurance and taxes on the building
D
44. While they require very specialized information, farm loans are based on the same three legs as all mortgage loans, which are: A. a creditworthy borrower, adequate collateral, good crops B. both crops and livestock, a creditworthy borrower, adequate income C. income sufficient to repay the loan, assured good weather, a creditworthy borrower D. creditworthy borrower, adequate collateral, income sufficient to repay the loan
D
54. All of the following are true of maximum and minimum limits for conventional loans EXCEPT: A. Fannie Mae/Freddie Mace set new limits each year for their conventional/conforming loans B. if a prospective loan exceeds an institution's in-house limit, other lenders may join in a participation loan C. setting minimum limits for loan amounts is a possible violation of the Fair Housing Act D. all states set limits on the maximum amount for residential loans within the state
D
57. In a non-judicial foreclosure, the power of sale clause in a mortgage grants the right to take the action to the: A. Court B. Mortgagor C. Trustee D. New buyer
D
58. Which of the following is correct in regard to an owner's title insurance policy? A. It is transferable to a new property owner B. The policy terminates when the mortgage loan is paid off C. The policy terminates when the property is transferred to a new owner D. It protects the policy holder against adverse claims even beyond the term of property ownership
D
63. An automated underwriting system is one that: A. automatically takes a loan application B. can only transmit loan information for automatic analysis by a human underwriter C. can analyze any loan without special software D. allows a computer with proper software to analyze a loan application and grant approval if justified
D
69. Which of the following is true of loans made on the Internet? A. They are always higher cost mortgage loans B. There is no opportunity for sham operators to take advantage of consumers C. A user must travel to find an Internet outlet D. A seeker of a loan can maintain limited anonymity while asking for information
D
77. Determining for sure whether or not a particular land area falls under the definition of wetlands must be made by: A. the landowner following guidelines issued by the EPA and the Corps of Engineers B. observation of the types of vegetation growing in the area C. an engineering analysis of water content in the soil D. inspection and determination by the U.S. Corps of Engineers
D
86. RESPA requires disclosure of estimated closing costs for residential loans at which of the following times? A. Any time prior to actual closing B. Within three days of loan application C. Only if requested by the borrower D. Within three days of loan application and again one day prior to closing if the borrower request it
D
91. A mortgagee's title policy protects which of the following against an adverse claim of title? A. Borrower B. Trustee C. Real Estate agent D. Lender
D
