Finance Section- TX Real Estate Exam
In a deed of trust, who is the trustor?
borrower
Which of the following led to the 2007 financial crisis and negatively impacted investors that purchased properties in the early 2000s?
falling home prices.
In a deed of trust, who is the beneficiary?
lender
Who's the mortgagee in a mortgage?
lender
The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.
the borrower.
John wants to do a 1031 tax exchange with a property he just sold. How many calendar days does he have to identify a new property for the exchange?
45 days
You have a client who wants to obtain a VA loan. You refer them to ______.
A VA-approved lender
What is a collateralized mortgage obligation?
A debt security holder
What happens after a lien foreclosure sale if not enough money were made from the auctioning of the property to pay off the lien holders?
A deficiency judgment against the property owner for the outstanding balance to the lien holders is issued.
What is a moratorium (or forbearance)?
A lender temporarily suspends a borrower's payments.
In a deed of trust, who is the trustee?
A neutral third party. (The trustee is the one who holds the trust on behalf of the beneficiary the lender).
What is a seller carry back?
A type of financing
Regional State Bank has made a lot of loans to consumers in the community and is running low on funds. It seeks a loan from the Federal Home Loan Bank. This loan is called a(n) ______.
Advance
Regional State Bank is a member bank of the Federal Home Loan Bank. In exchange for mortgage collateral, Regional State Bank received a loan from the FHLB so it can make additional loans to consumers. What is the loan called that Regional State Bank received?
Advance
What is the three-property rule as it relates to tax-deferred exchanges?
An investor can identify up to three replacement properties and not encounter a restriction regarding fair market value as long as debt load requirement is met.
A VA loan program that allows a veteran to refinance at a lower rate and receive cash proceeds to fund other investments or purchases is ______.
Cash Out Refinance
Which of the following VA programs requires a credit check, new appraisal, and income verification?
Cash Out Refinance
The ______ was a response to the practice of redlining and was enacted in 1977.
Community Reinvestment Act
Freddie Mac targets which type of loans to purchase?
Conventional
A lender was not able to recover all of the losses incurred during the foreclosure process. What could it pursue to recoup these losses?
Deficiency judgment
Which of the following could an investor who sells an apartment house buy using a 1031 exchange?
Duplex, office building, or warehouse
Which of the following is a true statement about tranches?
Each tranche has specific rules for distributing income received from the collateral, and has differing balances, maturities, and risks.
Percy is buying a home with an FHA loan. He uses the ______ to borrow enough money to cover the cost of replacing most of the windows in the home, which will improve its energy usage by 15%.
Energy Efficient Mortgage
The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.
Exculpatory.
On an FHA 203(k) loan, the combined cost of home value and rehab must ______.
Fall within the FHA mortgage limit for the area where the property is located
Which institution was created as the Federal National Mortgage Association in 1938?
Fannie Mae
Which government program assists rural Americans by offering loans, grants, and loan guarantees for housing?
Farm Credit Administration Farm Credit System Farmer MacUSDA Rural Development 4
Federal Home Loan Bank is regulated by what agency?
Federal Housing Finance Agency
Which process temporarily stalls foreclosure?
Filing for Chapter 7 bankruptcy
Which of the following statements related to 1031 tax-deferred exchanges is true?
Foreign investors may participate.
How might a borrower avoid paying the mortgage insurance premium required by an FHA loan?
Get conventional financing
Cindy is buying an older home. It's in reasonably good shape, but she figures she can reduce her energy bills by replacing some of the windows. If she applies for the FHA Energy Efficient Mortgage program, what step must she take to receive approval?
Give her lender a report of the cost estimate and energy savings from an energy consultant.
A lender benefits from selling loans to Fannie Mae by ______.
Increasing capital to offer loans with larger sale prices
Your client has a VA loan and wants to refinance to a lower rate. Which of the following is likely the simplest option?
Interest rate reduction refinance
What's the purpose of a typical subordination agreement?
It allows a junior mortgage to move into first lien position.
Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?
It increases demonstrated income.
Which of the following best describes the non-judicial foreclosure process?
It may be used if the deed of trust includes a power-of-sale clause.
Which of the following clauses is included in Fannie Mae's multi-state note?
Late charge
In a deed of trust, who is the beneficiary?
Lender
Which of the following is a passive type of real estate investment?
Limited partnership
When an adjustable rate mortgage (ARM) makes its initial adjustment, it does so to its fully indexed rate. What makes up the fully indexed rate?
Margin plus index
How much of a mutual savings bank's assets come from savings accounts?
More than 70% of the assets of a mutual savings bank come from savings accounts.
Life insurance companies participate in real estate in the ______ arena.
Mortgage blocks from secondary mortgage market
In a deed of trust, who is the trustee?
Neutral Third Party
How can liens, such as those created by non-payment of federal income tax, result in mortgage default?
New liens can threaten the lender's position as primary lienholder. Default can occur for this reason.
Jackie is 10 days late on her loan payment. Will her lender likely place her loan in default?
No, she needs to be 30 days late to be in default.
In order for the spousal support Kayla receives to be considered in the lender's income evaluation when Kayla applies for a home loan, what must be true?
Payments must have been received for at least one year, and must be expected to continue for at least three more years.
Which of the following best describes foreclosure by writ of entry?
Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed
Which of the following best describes foreclosure by entry and possession?
Petition to enter, repossession, notice of eviction
Two areas of vulnerability for the lender occur when homeowners insurance is allowed to lapse. What are they?
Property damage and judgment liens
Annual MIP can be removed from an FHA loan by ______.
Refinancing to a conventional loan
What qualifying ratios are used in a VA home loan?
Residual income and debt-to-income
When interest rates increase, what is the impact on mortgage-backed security investors?
Returns on investments increase.
What type of investment strategy is most similar to a 1031 tax-deferred exchange?
Rolling over funds from one IRA into another
The Addams family has an FHA-insured loan. The family's mortgage payment has a fixed interest rate, but after the first five years, the rate will adjust annually. Which FHA loan insurance program are they using?
Section 251
Which of the following requirements must a person meet to qualify as a Texas veteran?
Serve at least 90 active duty days
When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.
That the work meet FHA's basic energy efficiency and structural
The annual MIP is recalculated each year using ______.
The end-of-year loan balance, plus the balance after the next 11 payments
For tax years 2018 to 2025, a borrower can write off the interest on a home equity loan only if ______.
The funds are used to buy, build, or improve the home that secures the loan
In a deed of trust, who is the beneficiary?
The lender.
Janie and Sam are newly married and are looking for their first home. They're fortunate that Janie's mom set aside some money to help with this purchase. Janie's mom says it's a loan, though, and they will have to pay her back. What's wrong with this?
The loan will go against debtload.
Which of the following is a true statement about when a promissory note is sold?
The promissory note is endorsed and sold to the owner.
What is the 95% 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.
How many parties does a deed of trust involve?
Three: borrower, lender, and trustee
What's the purpose of the fixed/adjustable rate note?
To convert the interest rate from fixed to adjustable
Rich wants to add a room to his house, so he takes out a home equity loan. This creates a(n) ______ lien.
Voluntary and Specific.
When do capital gains tax, recaptured depreciation, and transfer taxes apply?
When investment properties are sold
When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.
A.That the contractor agree to a 10% discount for all labor B.That the work be completed within one year of closing on the loan C.That the work be done by a HUD-approved contractor D.That the work meet FHA's basic energy efficiency and structural standards D
Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.
Alienation
Alternatives to foreclosure include deed in lieu of foreclosure, short sale, or ______.
Bankruptcy
Dorinda is an investor. She recently purchased shares in a tranche that holds mortgages and mortgage-backed securities. In what did she invest?
Collateralized mortgage obligation
Robbie's lender notified him of an impending foreclosure, and told Robbie that his property will be sold at public auction. After the auction occurred, he receives a notice of eviction for which the lender had to petition a court. What does this describe?
Foreclosure by advertisement
Which of the following entities buys loans primarily through thrifts?
Freddie Mac
Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?
He will pay 1/12 of it monthly with his mortgage payment.
Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?
Her rate will be 3% Y1, 4% Y2, and stay at 5% Y3 and duration of the loan
What is the interest rate on a VA loan?
It varies by lender
Lendright Home Loans asked a trustee to begin foreclosure proceedings as permitted by the power-of-sale clause in the security instrument. This action does not need to involve the courts. What type of foreclosure process is being used?
Non-judicial foreclosure
Which of the following statements best describes a foreclosure by advertisement?
Notification of pending auction, public auction, notice of eviction
While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.
Only total debt-to-income
Sophie only has 15% to put down on her new home. What might the lender require in order for Sophie to obtain conventional financing?
Private Mortgage Insurance
When an investment property is sold, three taxes that apply are transfer tax, capital gains and ______.
Recaptured Depreciation
Bob just sold his investment property. Which taxes will apply?
Recaptured depreciation and capital gains
Which of the following types of residential dwellings do life insurance companies purchase from the secondary mortgage market?
Single-family on one lot
The Federal Housing Administration's mission includes ______ through the establishment of lending standards and by insuring mortgages.
Stabilizing the mortgage market
The purpose of a living expenses savings account is ______.
To hold extra living expenses when income is high, so that the money is "out of sight."
Sam has a mortgage that has a static interest rate, but monthly payments that increase over time according to a set schedule. What type of mortgage does Sam have?
growing equity
Vantagestar Ltd. would like to construct a high-end condominium complex. Where will they likely go for financing this project?
A shopping mall
Lender Ron is running Sally's credit report. In which section of the credit report might Ron expect to find information regarding her loan that was paid off on time?
Accounts in good standing
The interest rate on an FHA Section 251 adjustable rate mortgage will ______.
Go up or down, but can't change more than a maximum number of points allowed by the FHA over the life of the loan
Joseph is self-employed and wants to buy his first home. What additional document may he need to provide to the lender when trying to obtain a loan?
IRS Form 4506-T
How does the Federal Housing Administration fund its mortgage insurance program?
Income comes from mortgage insurance programs for the benefit of homebuyers, renters, and communities.
Chapo's property was foreclosed on and he is facing a deficiency judgment so the lender can recover losses incurred from the foreclosure process. What type of lien may the lender levy against Chapo until the losses are paid?
Blanket Lien
Regina has defaulted on the terms of her mortgage, and now her lender has foreclosed. The property was sold at a sheriff's sale three months ago. Regina suddenly learns that she has inherited a great deal of money. She wants her property back. Under a judicial foreclosure, what right might allow her to buy her property from the winner of the foreclosure auction?
Statutory right of redemption
Jonathan has come up with a plan. He's going to offer to buy property belonging to his neighbor, who's struggling financially, collect rent from his neighbor, and not make the mortgage payments. He'll rake in the rent until the bank forecloses. Which type of mortgage fraud scheme is this an example of?
Equity Skimming.
Which of the following taxes apply while an investor holds an investment property?
Rental income
Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?
Reduce lender risk by establishing borrower qualification standards