Finance Quiz questions
$1,108,292.40 To find the total amount paid back, multiply the monthly payment by the total number of payments: $3,078.59 x 360 = $1,108,292.40.
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount he'll pay back over the life of the loan?
$2,333.33 $400,000 x 0.07 = $28,000. $28,000 ÷ 12 = $2,333.33
A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month's mortgage payment is interest?
$241,715.88 If $1,033.54 of the $2,102.36 is interest, that leaves $284.12 for principal. Subtract $284.12 from $242,000 for a new principal balance of $241,715.88.
A buyer with a $242,000 loan has a monthly principal and interest payment of $1,317.66. If $1,033.54 is interest, what's the new principal balance after the first payment is applied?
Fines up to $10,000
A foreclosure consultant was found guilty of violating the Mortgage Foreclosure Consultant Law. As a result, the consultant could face up to one year in prison, ______, or both.
Equity
A home equity line of credit (HELOC) is based on the homeowner's available ______.
Reverse annuity mortgage (RAM)
A loan made from a homeowner's equity where funds are drawn over time and the bank gains corresponding property ownership is called a ______.
Informs the prospective borrower about the terms of the loan being offered The Mortgage Loan Disclosure Statement informs the borrower about the terms of the loan being offered. The licensee must deliver this disclosure to the prospective borrower within three business days of receiving a loan application.
Brittany is a real estate licensee with a mortgage loan originator endorsement. When she acts as an MLO, the California Real Property Loan Law requires her to give her clients a disclosure that ______.
Location
Conforming loan limits vary based on the number of units being purchased with the property and ______.
The Federal Housing Finance Authority
Which agency regulates FHLBanks?
A separate bank account in the corporation's name
Which of the following is a requirement if you set up a corporation in order to perform real estate services?
Only self-employed individuals can use SEP IRAs
Which of the following is a true statement about retirement accounts?
Freddie mac, Fannie mae, and Farm credit system
Which of the following is an example of a government-sponsored enterprise (GSE)?
Savings accounts
Which of the following items would be included in the M2 money measure?
A Record recording system
You and your financial system will communicate through ______.
Dont exceed the CRV
A second mortgage on property secured by a VA loan is acceptable under certain conditions, one of which is that the first and second mortgage liens ______.
Help a borrower meet lender qualification standards
A seller buydown can ______.
Annual percentage rate
A standardized measure for interest rates and other costs of the loan is called _______.
Increase
As interest rates fall, the number of buyers in the market is likely to ______.
Financial advisor
Brenda's go-to financial expert has no fiduciary responsibility to her. This is because she's working with a(n) ______.
As soon as possible before the execution of any note or security document
California's Seller Financing Disclosure Law requires the arranger of credit to provide both the buyer and seller with disclosures. What's the timing requirement for this disclosure?
CalVet holds the legal title to the property until the loan is paid off.
Conrad has purchased a home in California and, as a veteran, he's been able to take advantage of the CalVet home loan program. How does this loan program work?
Returns on investments decrease.
How do falling interest rates impact investors in mortgage-backed securities?
Lease with option to buy
In which situation will sellers apply a portion of the rent toward the purchase price to entice the buyers to close more quickly?
Partnership between mortgagees and mortgagors
In which type of participation agreement would a financier lower the interest on the mortgage in exchange for partial ownership of the project?
It doesn't earn high enough interest.
Karen has saved $30,000 of her $40,000 goal for a down payment on a house. Why is it unwise to keep all of that money in a traditional savings account?
States who owes money to whom, how much, and how it will be repaid
Krista is obtaining a loan to buy a home. Her loan agreement consists of one document called a note and one called a deed of trust. What's the role of the note?
The estimated amount the client will pay by cashier's check or wire transfer at closing
Page one of the Loan Estimate includes a section called "Costs at Closing." The amount shown as estimated cash to close is ______.
When the borrower has fully paid off the loan, the lender will record that the note is satisfied.
Select the choice that best translates this clause into plain English. "Upon payment of all sums secured by this Mortgage, Mortgagee shall discharge this Mortgage without cost to Mortgagor. Mortgagor shall pay all costs of recordation, if any."
Both Certificate and Saving account deposits
The FDIC would likely insure....
Streamline Refinance
The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.
Provide strong, sustainable, inclusive communities and qualify affordable homes for all
The HUD's mission is to
New homes
The construction of which item has the largest influence on the country's economy?
Prices are pushed upward. Fewer properties = greater scarcity = higher demand for the properties that are available = upward pressure on prices.
The fewer properties on the market, the greater the scarcity (value). What's the effect on prices?
Meet the same eligibility criteria as for the VA guaranteed loan program
Veterans who wish to use the Native American Direct Loan must ______ and their tribe must have a valid agreement with the VA to offer the program.
Business income is taxed on the owner's personal return
What is meant by pass-through taxation?
Wills are made public; trusts are not.
What is one disadvantage of a will over a trust?
The combined fair market value of the property (or properties) being exchanged into cannot be more than 200% of the relinquished property.
What is the 200% rule as it relates to tax-deferred exchanges?
The total value of the property (or properties) being exchanged is at least 95% of the value of the property being sold.
What is the 95% rule as it relates to tax-deferred exchanges?
Troubled Asset Relief Program
What program allowed the U.S. Treasury to spend hundreds of billions of dollars to stabilize our financial system, boost credit markets, help families avoid foreclosure, and promote economic growth?
New construction and home purchases would greatly decrease
What would likely happen to the real estate market if there were no lenders?
The draw period varies.
What's true about the draw period on a home equity line of credit?
That the work meet FHA's basic energy efficiency and structural standards
When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.
Returns on investments increase. Investors may benefit from increasing interest rates. Higher rates mean larger interest payments that eventually pass through to investors.
When interest rates increase, what is the impact on mortgage-backed security investors?
Taxpayer Relief Act of 1997
Which act exempted homeowners from paying taxes on capital gains up to a specified value?
American Taxpayer Relief Act of 2012
Which act made some mortgage insurance premium deductions available to certain taxpayers?
American Recovery and Reinvestment Act of 2009 (ARRA)
Which act was also known as "the stimulus package" and sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending.
Pledging a house as security on a mortgage
Which of the following best describes collateral?
High but stabilized unemployment and a high number of foreclosures
Which of the following best describes the state of the market during the recovery phase of the real estate cycle?
Late Charge
Which of the following clauses is included in Fannie Mae's multi-state note?
Falling home prices
Which of the following contributed to the 2007 financial crisis?
Duplex, office building, or warehouse
Which of the following could an investor who sells an apartment house buy using a 1031 exchange?
A home equity line of credit
Which of the following is an example of a residential mortgage loan?
Making a down payment
Which of the following is an example of leveraging in a real estate transaction?
They don't service the loan beyond placement.
Which of the following is true about mortgage brokers?
A decrease in money in the economy Selling securities removes some money from the economy. Buying securities adds money to the economy.
Which of the following results from the Treasury selling securities?
Consumers are withdrawing more money from banks than they are depositing.
Which of the following statements best describes disintermediation?
Twelve district banks comprise the Fed.
Which of the following statements is true about the Federal Reserve?
Set construction standards for homes purchased with FHA loans
Which of these items did the FHA implement to stabilize and improve the mortgage market?
Mortgage Loan Broker Law
Which of these names is also known as the California Real Property Loan Law?
Only the borrower and the lender
Which parties must be identified on the promissory note?
670 to 739
Which range of credit scores do most consumers fall into?
A change in zoning ordinances
You live and work in the north central U.S. Which of the following factors has a direct impact on property at the local level?
$105,263.16 $105,263.16 x .95 = $100,000
Your seller wants to net $100,000 after the 5% commission is paid. Assuming no closing costs, at what price does the home need to sell for the seller to net this amount?
Always serves as a member of the FOMC
The Reserve Bank of New York ______.
Alienation
The ______ clause is also known as a due-on-sale clause.
California Real Property Loan Law
Jan is a real estate licensee with a mortgage loan originator (MLO) endorsement. When she acts as an MLO, what law limits the amount of commission and fees she can earn for negotiating a loan on behalf of her client?
He will pay 1/12 of it monthly with his mortgage payment.
Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?
Open market operations
The buying and selling of government securities as a way to influence the money supply and balance economic growth describes _________.
The borrower is allowed to prepay the loan without penalty.
Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing."
Buy and hold This is buy and hold. It's a long-term, active form of investing. Although Shelly does fix up the properties, she doesn't then flip them (sell them for cash).
Shelly's real estate investment strategy is to look for smaller multi-family properties, fix them up, and rent them out. Her investment strategy most closely matches which of the following?
Community Reinvestment Act
The ______ was created in response to the practice of redlining.
The payee. The lender is the payee who holds the note while it's being repaid. If the note is transferred, the new owner becomes the payee and note holder.
Who holds the promissory note while it's being repaid?
Truth in lending act
The ______ was enacted in 1968 as part of the Consumer Credit Protection Act.
The successor trustee
Who distributes the trust assets of a person who died?
Because it accommodates a variable income better than a traditional financial plan does
Why are real estate licensees encouraged to use a personal financial plan that allocates a percentage of income to expenses and savings goals?
Page one
Cassie is helping her buyer client, Gus, prepare for closing. "When you get your Closing Disclosure from the lender," she tells him, "make sure you check that the borrower and seller names, the property address, and the sale price on ______ are accurate and spelled correctly."
M2 CDs valued at less than $100,000 are accounted for in the M2 measure. CDs valued higher than $100,000 are accounted for in the M3 measure.
Certificates of deposit (CDs) valued at less than $100,000 are accounted for in which money measure?
Median price for the area and property type
FHA county loan limits are based on ______.
At least 90 days
For how long must a borrower be delinquent to qualify for the Streamlined Modification Program (SMP)?
Ask her tax professional
Izzy wants to know how much of her income to allocate to her income tax savings account. What should Izzy do?
Make and service any federally related mortgage loan
Licensing by the California Residential Mortgage Lending Act allows a mortgage banker to ______.
Average sale price of homes in the area where she'll be working
Linda is estimating her annual income. She expects that her commission will be 2.5%, and she plans to close at least seven transactions in the year. What else does she need to complete her estimate?
Match what the lender discussed with the consumer
On the Loan Estimate form, the information provided about the loan term, purpose, product, type, and rate lock should ______.
There is no statutory right of redemption
One difference between a judicial foreclosure and a non-judicial foreclosure is that with a non-judicial foreclosure, ______.
Pay the difference between CRV and sale price in cash
Rhoda is a first-time homebuyer. She has applied for a VA loan to buy a house from Phyllis. When the CRV values the home at less than the sale price, Phyllis refuses to come down on the sale price, so Rhoda must either ______ or find a different home to buy.
To remodel a home he OWNS to accommodate his disability
Roger is a veteran with a service-connected disability that requires him to use a wheelchair. He is eligible for the VA's Specially Adapted Housing grant. What can he use this grant for?
Leveraging
Tonia is buying a new home. She has a down payment of $30,000 and will obtain a $250,000 mortgage from a local bank to make up the remainder of the purchase price. What is this an example of?
They increased market speculation
What role did CMOs play in the financial crisis of 2007?
Utility
Which factor that influences value looks at the function for which the property is used?
Duplex used as a rental property Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.
For which of these properties would gross rent multiplier be calculated?
Distributes grant funding to help meet community needs as determined by state and local governments
How does the Community Development Block Grant program assist in supporting HUD's mission?
One month
How long should you track your spending in order to analyze your spending habits?
Seller
If a cloud on a title is discovered, which party is generally responsible for clearing the cloud?
It creates a lien on the property, and the borrower, not the trustee, holds legal title.
In California, how has state law modified the way the deed of trust works?
One year
In a judicial foreclosure, if the sheriff's sale wasn't enough to pay off the borrower's debt plus foreclosure costs, how long does the borrower's redemption period last?
Six months
Shania is having work done on the house she just purchased using an FHA 203(k) loan. How much time does the contractor have to complete the work?
Yes, Sissy can apply to have her entitlement restored and can buy a second house using a VA loan.
Sissy is a veteran who used her full entitlement to purchase a home. The loan has since been paid off, and Sissy still owns the home. Now, she'd like to buy a second home using another VA loan. Is Sissy allowed to do this?
The introduction of the long-term amortized loan
The FHA has helped to significantly improve the mortgage market through ______.
Member banks can keep fewer assets on deposit at the reserve bank. If reserve requirements are decreased, member banks don't need to keep as much money on deposit at the reserve bank. This means they have more assets to lend to the public.
What does it mean if the Fed decreases reserve requirements?
FDIC
Which banking-related entity shares similarities with the purpose and function of the NCUA?
It may be a first mortgage, a junior mortgage, or a junior wrap-around mortgage.
Which best describes a purchase money mortgage?
Set rules and regulations that member banks must follow
In addition to lending money to member banks, FHLBanks also do which of the following.