Finance study real estate
Alternative financing programs are: a. popular during times of high interest rates. b. unpopular during times of high interest rates. c. illegal under RESPA. d. none of the above.
A
Based on FNMA and FHLMC guidelines, mortgage interest rates are generally limited by lenders to an annual increase of: a. 2%. b. 20%. c. 200%. d. none of the above.
A
In a civil lawsuit brought by a party who has been discriminated against, punitive damages are awarded: a. to compensate for any loss suffered. b. to punish the wrongdoer. c. to pay attorney fees. d. to pay court fees.
A
In a growth equity mortgage (GEM): a. payments increase annually. b. payments decrease annually. c. interest rates decrease annually. d. none of the above.
A
Private mortgage insurance reduces: a. the lender's risk of loss in the event of borrower default. b. the borrower's risk against rising interest rates. c. the seller's risk in the event of a buyer backing out of the sale. d. none of the above.
A
Real estate loans would be noted on the loan application under: a. assets and liabilities. b. declarations. c. details of purchase. d. all of the above.
A
Redlining is: a. refusal to lend in certain neighborhoods. b. not lending to bad credit customers. c. not lending on insufficient collateral. d. all of the above.
A
The maximum origination fee for both FHA and VA loans is: a. 1%. b. 10%. c. 20%. d. $1500.00
A
The maximum veteran entitlement for a VA loan guaranty is: a. $36,000. b. $360,000. c. $360. d. none of the above.
A
The statutory FHA down payment is: a. 3.5%. b. 10%. c. 50%. d. none of the above.
A
Under Truth in Lending, who is responsible for explaining and compliance with the act? a. The creditor b. The borrower c. The arranger of credit d. The Real Estate Commissioner
A
Under the TRID Rule, the Loan Estimate combines the: a. Good Faith Estimate and the initial Truth-in-Lending Disclosure. b. Good Faith Estimate and the final Truth-in-Lending Disclosure. c. Good Faith Estimate and the HUD-1. d. HUD-1 and the final Truth in Lending Disclosure.
A
What agency exists solely to provide a secondary market for farm mortgages? a. "Farmer Mac" b. "Freddie Mac" c. "Sally Mae" d. "Fannie Mae"
A
A borrower must provide employment status for the past: a. one year. b. two years. c. three years. d. five years.
B
A clause in a financial instrument that limits a borrower's right to transfer the property without the lender's permission is called a(n): a. acceleration clause. b. alienation clause. c. prepayment clause. d. none of the above.
B
A mortgage that remains at the same rate for the life of the loan is called: a. single rate. b. fixed rate. c. closed rate. d. non-assumable.
B
All of the following are true regarding a Notice of Sale, except: a. the notice must be published in a newspaper. b. the notice must be court-ordered. c. the notice must be sent to the borrower. d. the notice must be posted on the property.
B
An FHA appraiser must: a. note cosmetic defects only. b. provide a Valuation Conditions Form. c. provide a Homebuyer's Summary. d. note major health and safety deficiencies on the URAR.
B
Bankruptcies must be reported if they have occurred within the past: a. 3 years. b. 7 years. c. 10 years. d. 15 years.
B
Compound interest is: a. interest paid on the principal only. b. interest paid on the principal and the accrued interest. c. compounded monthly only. d. none of the above.
B
In California, the minimum score required in order to pass the Salesperson Exam is: a. 65%. b. 70%. c. 75%. d. 80%.
B
In a foreclosure under a Deed of Trust the Notice of Sale must be published in a newspaper for: a. 6 weeks. b. 3 weeks. c. 5 days. d. 3 days.
B
In a loan with negative amortization, the balance owed: a. decreases over time. b. increases over time. c. remains the same. d. none of the above.
B
In a promissory note, the borrower is called the: a. payee. b. maker. c. beneficiary. d. none of the above.
B
Institutions in the Farm Credit System are regulated and examined by: a. FNMA. b. the Farm Credit Administration. c. FHLMC. d. all of the above.
B
The FHA maximum debt ratios are: a. 25% and 35%. b. 31% and 43% c. 50% and 70%. d. 29% and 45%
B
The Government National Mortgage Association (GNMA), or "Ginnie Mae": a. only deals with agricultural loans. b. is a wholly owned government corporation. c. is considered a lender of last resort. d. is part of the Department of Justice.
B
The first step in the VA loan process is: a. to fill out a loan application. b. for the veteran to obtain a Certificate of Eligibility. c. to obtain a loan guaranty from the VA. d. none of the above.
B
The intentional misrepresentation or omission of material facts by applicants or others to improperly influence a mortgage loan lender is known as: a. an air loan. b. mortgage fraud. c. property flipping. d. consumerism.
B
The purchaser of an option is called: a. the optionor. b. the optionee. c. the lessee. d. none of the above.
B
The seller in a real estate land contract is known as the: a. pawn. b. vendor. c. vendee. d. none of the above.
B
What age must a reverse mortgage borrower be? a. Over 55 b. Over 62 c. Over 65 d. Over 70
B
While ethics is what is right: a. it has nothing to do with values. b. government laws set minimum standards of behavior. c. it does not apply in real estate. d. ethics is illegal in California.
B
All licensed/registered MLOs are issued: a. a unique identifier number. b. a tax identification number. c. a picture ID card. d. all of the above.
A
A credit report is: a. paid for at the time of application. b. provided by the borrower. c. ordered by the escrow agent. d. not necessary.
A
A foreclosure that does not have to be taken to court is called: a. nonjudicial. b. nonrecurring. c. nonamortized. d. all of the above.
A
A loan that exceeds the maximum amount that FNMA or FHLMC will lend is called a: a. jumbo loan. b. maxi-loan. c. titanic loan. d. none of the above.
A
A sale where the lender accepts less than the amount owed on the existing debt is: a. known as a "short sale." b. not allowed on owner-occupied property. c. allowed because of a due on sale provision. d. only allowed if approved by the NMLS.
A
A scheme in which a recently acquired property is resold for a considerable profit with an artificially inflated value, often as the result of collusion with an appraiser is known as: a. property flipping. b. leverage. c. ballooning. d. acey-deucy.
A
A scheme where the down payment is actually borrowed or carried as a second mortgage by the seller but never documented in the purchase agreement, escrow instructions, or recorded is known as: a. an air loan. b. leverage. c. a silent second. d. a disappearing second.
A
A clause in a finance instrument that allows a lender to demand immediate payment in the event of a default by the borrower is called a(n): a. prepayment clause. b. alienation clause. c. acceleration clause. d. none of the above.
C
A loan that meets the standards of the secondary market (Fannie Mae and Freddie Mac) is called a: a. government loan. b. nonconventional loan. c. conforming loan. d. none of the above.
C
A proration is used to: a. convert the nominal rate to an APR. b. calculate the broker's commission. c. divide expenses fairly between buyer and seller. d. none of the above.
C
According to the Mortgage Reform and Anti-Predatory Lending Act a mortgage loan originator may only receive compensation that is based on: a. the varying terms (interest rate, points, etc.). b. actual time spent working on the file. c. the rate set by NMLS. d. the principal amount of a residential mortgage loan.
C
An appraiser provides an: a. opinion of the value of the loan. b. opinion of the value of the borrower's credit. c. opinion of the value of the property. d. all of the above.
C
An escrow agent: a. fills out the loan application. b. obtains the credit report. c. acts on the instructions of the parties to the loan. d. all of the above.
C
An estoppel letter is used to: a. prevent a lender from participating in a loan. b. protect an agent engaging in a creative financing transaction. c. prevent a lender from exercising the due-on-sale clause. d. none of the above.
C
As per the TRID Rule, if a creditor provides a corrected Loan Estimate, how long of a new waiting period before consummation of the loan is required? a. 24 hours b. 48 hours c. 3 days d. 7 days
C
For an FHA loan on mixed-used use property, the allowable percentage of commercial use for a single-story building must not be more than: a. 25%. b. 50%. c. 75%. d. none of the above.
C
In processing a loan, a commitment for private mortgage insurance would be required if the down payment was less than: a. 50%. b. 40%. c. 20%. d. none of the above.
C
Liquid assets include: a. real estate only. b. cash only. c. any assets that can readily be converted to cash. d. none of the above.
C
Market value is: a. the amount the broker needs to do the loan. b. the sales price of the home. c. the most probable price that a property should bring in an open and competitive market. d. none of the above.
C
One point" is: a. $1,000.00. b. 1% of the sales price. c. 1% of the loan amount. d. none of the above.
C
Regulation Z: a. allows the right of rescission. b. requires that a consumer be provided with the annual percentage rate. c. requires proper disclosure of all finance terms in advertising. d. none of the above.
C
The first step in the loan process is: a. obtaining the credit report. b. setting up escrow. c. filling out the loan application. d. none of the above.
C
The greatest risk of default is caused by: a. large down payments. b. overpriced housing. c. small or no down payments. d. none of the above.
C
The minimum requirement in needed repairs for an FHA 203k loan is: a. $20,000. b. $10,000. c. $5,000. d. none of the above.
C
The payment of points to the lender at the time a loan is made to reduce the interest rate and lower the borrower's monthly payments is called: a. meeting the cap. b. an index loan. c. a buydown. d. none of the above.
C
The standard loan-to-value ratio has traditionally been: a. 60%. b. 70%. c. 80%. d. 90%.
C
Those who participate in creative financing should: a. consult a real estate attorney. b. exercise caution. c. both a and b. d. none of the above.
C
Which Act forbids kickbacks? a. The Home Mortgage Disclosure Act (HMDA) b. The Truth in Lending Act (TILA) c. The Real Estate Settlement Procedures Act (RESPA) d. The Equal Credit Opportunity Act (ECOA)
C
A Notice of Default and Election to Sell is prepared by trustee for the benefit of the: a. tenant. b. sheriff. c. borrower. d. lender.
D
A borrower seeking a conventional loan with a larger LTV than the traditional ratio is required to: a. have a cosigner on the loan. b. make a 50% down payment. c. be over the age of 55. d. carry private mortgage insurance
D
A borrower who has a 90% loan at 7.5% interest with a 2% annual interest rate cap must qualify at: a. 8%. b. 8.5%. c. 9%. d. 9.5%.
D
A conventional loan is a loan that: a. follows the secondary market's underwriting guidelines. b. is not insured or guaranteed by any government entity. c. has the normal seller financing terms. d. all of the above.
D
A lease/option is used to: a. keep a sale alive. b. reduce the selling price over time. c. provide income to the seller while awaiting the close of a sale. d. all of the above.
D
A loan that is repaid with periodic payments that include principal and interest so that the entire loan is paid by the end of the term is a(n): a. unconventional loan. b. straight note loan. c. annualized loan. d. amortized loan
D
A wraparound mortgage can: a. provide an above-market rate of return to the seller. b. allow a buyer to have a below-market interest rate. c. be used in place of a simple assumption. d. all of the above.
D
FNMA and FHLMC are: a. government agencies. b. primary lenders. c. funded by the U.S. Treasury. d. government-chartered private lenders.
D
In California the Real Estate Commissioner can: a. deny any license issued by the Bureau of Real Estate. b. suspend any license issued by the Bureau of Real Estate. c. revoke any license issued by the Bureau of Real Estate. d. all of the above.
D
In addition to any individual state requirements, pre-requisites for licensing by NMLS include: a. testing. b. a criminal background check. c. pre-licensing education. d. all of the above.
D
In reconciling the Closing Statement with the Loan Estimate, "zero tolerance" charges include: a. fees paid to the creditor or mortgage broker. b. fees paid to an unaffiliated third party if the consumer was not permitted to shop for a third party service provider. c. transfer taxes. d. all of the above.
D
Information provided for government monitoring purposes is: a. required. b. highly intrusive. c. used for racially redlining borrowers. d. entirely voluntary on the part of the borrower.
D
Lenders offering adjustable-rate mortgages must: a. comply with Regulation Z. b. provide the borrower with a general brochure. c. make certain specific disclosures. d. all of the above.
D
The FHA: a. buys loans in the secondary market. b. sells loans to the secondary market. c. is a direct lender. d. insures loans only
D
The Fair Credit Reporting Act: a. does not pertain to real estate transactions. b. does not pertain to unmarried individuals. c. requires credit reporting agencies to remove all adverse information over 7 years old except for bankruptcies and foreclosures. d. does not pertain to collection accounts.
D
Under the TRID Rule, the Loan Estimate must provide the: a. name and address of the creditor. b. address of the property (including the zip code) that will secure the financing. c. date the Loan Estimate is mailed or delivered to the consumer. d. all of the above.
D
Which federal Act gives consumers rights as to who has access to their credit files as well as to know what is in their files and the right to correct inaccurate credit information? a. The Fair Credit Reporting Act (FCRA) b. The Equal Credit Opportunity Act (ECOA) c. The Truth in Lending Act. (TILA) d. The Consumer Credit Protection Act (CCPA)
D
How many hours of continuing education must all MLOs complete annually? a. 45 b. 20 c. 12 d. 8
D. 8 Explanation: All Mortgage Loan Originators (MLOs) are required to complete a certain number of hours of continuing education (CE) annually to maintain their license and stay updated on industry regulations and practices. The specific number of CE hours varies by state, but the most common requirement is 8 hours of continuing education per year. These CE hours are designed to ensure that MLOs are knowledgeable about new laws, regulations, and best practices in the mortgage industry. By completing continuing education courses, MLOs can stay informed and maintain their expertise in their field. It's important for MLOs to fulfill their CE requirements within the designated time frame to remain compliant with licensing regulations. However, it's worth noting that the specific CE hour requirements can differ by state, so it's essential for MLOs to check the requirements set by their licensing authority to ensure they meet the correct number of hours for their jurisdiction.
Usury is: a. an interest payment in excess of the legally permitted rate. b. a medieval form of slavery. c. a person who has a financial trust. d. none of the above.
a. an interest payment in excess of the legally permitted rate. Explanation: Usury refers to the charging or collection of interest on a loan that exceeds the legally permitted rate. Option a is the correct answer. Historically, usury laws were put in place to regulate the amount of interest that could be charged on loans. These laws aimed to protect borrowers from exploitative lending practices and excessive interest rates. The specific definition of usury and the legally permitted interest rates can vary across jurisdictions and time periods. In many countries, there are laws and regulations that set limits on the interest rates that lenders can charge. These limits are designed to prevent predatory lending and ensure fair and reasonable interest rates for borrowers. When interest charges on a loan exceed the legally permitted rate, they are considered usurious. This means that the lender is charging an interest payment that is higher than what is allowed by law. Usury can be a violation of lending regulations and may have legal consequences for the lender. It's important to note that the definition of usury can vary, and what is considered usurious in one jurisdiction may not be in another. Usury laws are typically established to strike a balance between protecting borrowers from excessive interest charges and allowing lenders to earn a fair return on their investments. In summary, usury refers to the charging or collection of interest on a loan that exceeds the legally permitted rate. It is a term used to describe interest payments that go beyond the legal limits set by usury laws or regulations.
Mortgage bankers/mortgage companies: a. both originate and loan funds. b. act only as "go-betweens." c. are part of the secondary market only. d. none of the above.
a. both originate and loan funds. Explanation: Mortgage bankers or mortgage companies are involved in both the origination and lending of funds for mortgage loans. Option a is the correct answer. Mortgage bankers have a dual role in the mortgage lending process. They originate mortgage loans by working directly with borrowers, assisting them in the application and underwriting process, and facilitating the approval and funding of the loans. They act as intermediaries between borrowers and lenders, ensuring that the loan application is completed accurately and guiding borrowers through the loan origination process. Additionally, mortgage bankers also have the ability to provide loan funds directly to borrowers. They may use their own funds or funds obtained from various sources, such as warehouse lines of credit, to finance the mortgage loans they originate. This means that mortgage bankers have the capability to lend money directly to borrowers, which sets them apart from entities that solely act as intermediaries or "go-betweens" (option b). While mortgage bankers can originate and loan funds, it's important to note that they are not limited to the secondary market (option c). The secondary market refers to the market where existing mortgage loans are bought and sold. Mortgage bankers can participate in both the primary market (loan origination) and the secondary market (selling loans to investors or agencies) depending on their business model. In summary, mortgage bankers or mortgage companies play a dual role in the mortgage lending process. They originate mortgage loans by working directly with borrowers and facilitate the loan funding process. They can also provide loan funds directly to borrowers, distinguishing them from intermediaries, and their activities are not limited to the secondary market alone.
An investment is said to be liquid when it: a. can be readily sold. b. is worthless. c. is guaranteed by the government. d. is difficult to sell.
a. can be readily sold. Explanation: An investment is said to be liquid when it can be readily sold or converted into cash without significantly impacting its market value. Option a is the correct answer. Liquidity refers to the ease with which an asset or investment can be bought or sold in the market. Liquid investments are those that have a high level of trading activity and a large number of buyers and sellers, making it relatively easy to enter or exit a position without causing significant price fluctuations. Having a liquid investment is beneficial because it provides investors with flexibility and access to their funds when needed. If an investment is liquid, it means that it can be quickly converted into cash without incurring substantial costs or facing significant challenges in finding a buyer. On the other hand, investments that are illiquid can be difficult to sell or convert into cash. Illiquid investments typically have a limited number of potential buyers or a restricted market, making it challenging to sell them quickly or at a desirable price. Illiquid investments may include certain types of real estate, private equity, or long-term fixed-term investments. The level of liquidity can vary across different types of investments. For example, publicly traded stocks and bonds typically have high liquidity because they are actively traded on stock exchanges, allowing investors to buy or sell them easily. In contrast, investments like real estate properties or certain types of alternative investments may have lower liquidity due to longer sale processes or limited buyer pools. In summary, an investment is said to be liquid when it can be readily sold or converted into cash without significantly impacting its market value. Liquidity provides investors with the ability to quickly access their funds and exit their investment positions.
Doing accounting necessary for a loan is known as: a. loan servicing. b. loan warehousing. c. arbitrage. d. marking to market.
a. loan servicing. Explanation: Doing accounting necessary for a loan is commonly known as loan servicing. Option a is the correct answer. Loan servicing refers to the administrative tasks and activities associated with managing a loan after it has been originated. This includes various accounting functions related to the loan, such as recording payments, managing escrow accounts, calculating interest, and maintaining accurate loan balances. When a loan is originated, the borrower enters into a contractual agreement with the lender, outlining the terms and conditions of the loan, including repayment schedules, interest rates, and other financial aspects. The loan servicing process involves ensuring that these terms are properly administered and adhered to throughout the life of the loan. Loan servicers are responsible for a range of accounting-related tasks, including: Recording and tracking loan payments: Servicers keep records of all payments made by the borrower, including principal, interest, and any additional fees or charges. They ensure that payments are properly applied to the loan balance and account for any changes in outstanding amounts. Managing escrow accounts: For loans that require escrow accounts for purposes such as property taxes and insurance, servicers handle the accounting associated with these accounts. This involves collecting and disbursing funds to cover these expenses on behalf of the borrower. Interest calculations: Servicers calculate the interest that accrues on the loan based on the agreed-upon interest rate and the outstanding loan balance. This information is used to determine the amount of each payment that goes towards interest and principal. Reporting and reconciliation: Loan servicers generate periodic statements and reports for borrowers, providing details of payment history, outstanding balances, and other relevant information. They also reconcile accounts to ensure accuracy and identify any discrepancies or errors. Overall, loan servicing encompasses the accounting functions necessary to properly administer and manage a loan. It involves maintaining accurate records, processing payments, and providing borrowers with relevant financial information. Therefore, the cor
FHLMC (Freddie Mac) is an example of a: a. secondary market participant. b. primary market only participant. c. federal agency lender open only to veterans. d. none of the above.
a. secondary market participant. Explanation: FHLMC, also known as Freddie Mac, is a government-sponsored enterprise (GSE) that operates in the secondary mortgage market. As a secondary market participant, Freddie Mac does not directly originate loans but instead purchases and guarantees mortgage loans from primary lenders, such as banks and mortgage companies. Freddie Mac's main role is to provide liquidity to the mortgage market by purchasing loans from lenders, which in turn allows lenders to replenish their funds and continue originating new loans. By purchasing these loans, Freddie Mac helps to stabilize the mortgage market and promote affordable homeownership. In the secondary market, Freddie Mac packages the purchased loans into mortgage-backed securities (MBS) and sells them to investors. This process allows Freddie Mac to transfer the credit risk associated with the mortgage loans to investors while providing a stable source of funding to the primary lenders. It's important to note that while Freddie Mac is a federally chartered corporation and operates under the oversight of the Federal Housing Finance Agency (FHFA), it is not a federal agency lender open only to veterans (as mentioned in option c). Freddie Mac's activities are not limited to serving veterans but extend to a broader range of borrowers and mortgage market participants. In summary, FHLMC or Freddie Mac is an example of a secondary market participant as it operates in the secondary mortgage market by purchasing and guaranteeing mortgage loans from primary lenders, packaging them into MBS, and selling them to investors to provide liquidity to the mortgage market.
The availability of funds in the primary market depends on the existence of the: a. secondary market. b. stock market. c. commodities market. d. foreign exchange market.
a. secondary market. Explanation: The availability of funds in the primary market depends on the existence of the secondary market. The primary market is where newly issued securities, including stocks, bonds, and loans, are created and sold for the first time by borrowers and lenders. In the primary market, issuers raise funds by selling their securities directly to investors. However, the secondary market plays a crucial role in enhancing the liquidity and availability of funds in the primary market. The secondary market is where existing securities are bought and sold among investors. It allows investors to trade previously issued securities, providing an avenue for liquidity and price discovery. When the secondary market exists, it creates an opportunity for investors to buy and sell securities that were initially issued in the primary market. Investors who have already purchased securities in the primary market can sell them in the secondary market to other investors, thereby generating liquidity and freeing up funds for new investments. The availability of funds in the primary market can be influenced by the activity and performance of the secondary market. If the secondary market is active and robust, it provides investors with the ability to sell their existing securities, generate cash, and potentially invest in new securities issued in the primary market. In summary, the existence of the secondary market is crucial for the availability of funds in the primary market. The secondary market provides liquidity, allowing investors to buy and sell previously issued securities and freeing up funds for new investments in the primary market.
Who is responsible for supervising the Truth-in-Lending Law? a. The Federal Bureau of Investigation (FBI) b. The Consumer Financial Protection Bureau (CFPB) c. The United States Treasury d. The United States Attorney General
b. The Consumer Financial Protection Bureau (CFPB) Explanation: The Consumer Financial Protection Bureau (CFPB) is responsible for supervising and enforcing the Truth-in-Lending Act (TILA). TILA is a federal law that promotes the informed use of consumer credit by requiring lenders to disclose important terms and costs associated with credit transactions. The CFPB is an independent agency of the United States government that was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Its primary mission is to protect consumers in the financial marketplace and ensure fair and transparent practices by financial institutions. Under the CFPB's jurisdiction, it has the authority to enforce TILA and its regulations, investigate complaints, conduct examinations of financial institutions, and take legal action against entities that violate the law. The CFPB also provides educational resources and guidance to consumers to help them understand their rights and make informed financial decisions.
The type of lending institutions that focus on short-term business investments and have mostly short-term funds are: a. S&Ls. b. commercial banks. c. life insurance companies. d. mortgage companies.
b. commercial banks. Explanation: Commercial banks are the type of lending institutions that focus on short-term business investments and primarily have short-term funds. Commercial banks provide various financial services, including lending, deposit-taking, and other banking activities. They play a vital role in the economy by accepting deposits from individuals and businesses and using those funds to provide loans to borrowers. When it comes to short-term business investments, commercial banks offer various types of short-term financing options to businesses. These may include lines of credit, working capital loans, inventory financing, and trade financing. These loans are typically intended to meet the short-term financial needs of businesses, such as managing cash flow, purchasing inventory, or covering operating expenses. Commercial banks source their funds primarily through deposits from customers, such as individuals and businesses. These deposits are considered short-term funds since customers can withdraw them on relatively short notice. The banks then utilize these funds to provide loans and other financial services. While other institutions such as savings and loan associations (S&Ls), life insurance companies, and mortgage companies also play roles in lending, commercial banks are specifically known for their focus on short-term business investments and having mostly short-term funds. In summary, commercial banks are lending institutions that specialize in short-term business investments and primarily operate with short-term funds. They provide short-term financing options to businesses and source their funds through customer deposits.
In a seller's market: a. supply exceeds demand. b. demand exceeds supply. c. home prices decline. d. none of the above.
b. demand exceeds supply. Explanation: In a seller's market, there is a higher demand for homes compared to the available supply. This means that there are more potential buyers looking to purchase properties than there are homes available for sale. Several factors contribute to a seller's market. These may include a strong economy, low interest rates, a growing population, and limited housing inventory. In such a market, buyers often face competition, multiple offers, and a sense of urgency to secure a property. When demand exceeds supply, it typically leads to increased competition among buyers. This competition can drive up home prices as buyers are willing to pay more to secure a property in a market with limited supply. Sellers often have the advantage in negotiations, as they have more leverage due to the high demand for their properties.
Credit unions: a. are not allowed to make real estate loans. b. have a relatively small overall share of the mortgage lending market. c. are never allowed to merge with other credit unions. d. all of the above.
b. have a relatively small overall share of the mortgage lending market. Explanation: Credit unions do not have a prohibition on making real estate loans, which eliminates option a as the correct answer. Credit unions are financial institutions that are member-owned and operated, providing financial services to their members. While credit unions are authorized to make real estate loans, their overall share of the mortgage lending market tends to be relatively small compared to other types of financial institutions such as banks and mortgage companies. This is due to a few factors. First, credit unions generally have a more limited geographic reach compared to larger banks and mortgage companies. They often serve specific communities, employee groups, or other defined membership groups. This limited reach can result in a smaller pool of potential borrowers. Second, credit unions may have certain restrictions on their lending activities. For example, they may have limitations on the types of real estate loans they can offer, such as focusing on residential mortgages rather than commercial real estate loans. Lastly, credit unions may face competitive challenges in terms of marketing and resources compared to larger financial institutions. Banks and mortgage companies often have more extensive marketing campaigns and resources to attract borrowers, which can impact the market share of credit unions in the mortgage lending market. While credit unions play a valuable role in providing financial services to their members, including real estate loans, it is accurate to say that they have a relatively smaller overall share of the mortgage lending market, making option b the correct answer. In summary, credit unions are authorized to make real estate loans, but they typically have a smaller market share in the mortgage lending market compared to larger financial institutions such as banks and mortgage companies.
Money market funds are: a. the same as mutual funds. b. private noninsured investment accounts. c. held in the lender's portfolio. d. none of the above.
b. private noninsured investment accounts. Explanation: Money market funds are private noninsured investment accounts that invest in short-term, low-risk debt securities such as Treasury bills, certificates of deposit, commercial paper, and other highly liquid and low-risk instruments. They are not the same as mutual funds, as stated in option a. Money market funds are designed to provide investors with a relatively safe and liquid investment option that aims to preserve capital and provide a modest return. They are typically managed by financial institutions such as mutual fund companies, investment firms, or banks. Money market funds seek to maintain a stable net asset value (NAV) of $1 per share, meaning that the value of each share is intended to remain constant. Investors can typically buy and sell shares of money market funds on any business day at the NAV. While money market funds aim to provide stability and liquidity, it's important to note that they are not insured by the Federal Deposit Insurance Corporation (FDIC). Therefore, there is a small level of risk associated with money market funds, although it is generally considered to be low. In summary, money market funds are private noninsured investment accounts that invest in short-term, low-risk debt securities. They are not the same as mutual funds and are designed to provide investors with a safe and liquid investment option. However, they are not insured by the FDIC.
Private mortgage insurance is required on loans that exceed what percentage of the value of a property? a. 20% b. 50% c. 80% d. None of the above
c. 80% Explanation: Private mortgage insurance (PMI) is required on loans that exceed 80% of the value of a property. Option c is the correct answer. Private mortgage insurance is a type of insurance that protects the lender in case the borrower defaults on their mortgage payments. It is typically required by lenders when the loan-to-value ratio (LTV) exceeds 80%. The loan-to-value ratio is the percentage of the loan amount compared to the appraised value or purchase price of the property, whichever is lower. When the LTV is above 80%, it means that the borrower has a relatively small down payment and a higher loan amount in relation to the property value. Lenders view loans with higher LTV ratios as riskier because there is less equity in the property to serve as a cushion against potential losses. To mitigate this risk, lenders require borrowers to obtain private mortgage insurance. PMI is an additional cost that the borrower must pay, typically in the form of a monthly premium added to their mortgage payment. The insurance coverage provided by PMI protects the lender in the event of default, reducing the lender's financial risk. It's important to note that PMI is not applicable to all types of loans. For example, loans insured by the Federal Housing Administration (FHA) have their own mortgage insurance requirements. Additionally, borrowers may have the option to avoid PMI by making a larger down payment or securing a loan structure that eliminates the need for PMI. In summary, private mortgage insurance is required on loans that exceed 80% of the value of a property. When the loan-to-value ratio exceeds 80%, lenders require borrowers to obtain PMI to protect against the risk of default.
Loans that are made based on an owner's equity in real property are known as: a. investment quality loans. b. qualified loans. c. equity loans. d. unqualified loans.
c. equity loans. Explanation: Loans that are made based on an owner's equity in real property are commonly known as equity loans. Option c is the correct answer. Equity refers to the difference between the market value of a property and the amount of outstanding mortgage or debt secured by that property. When a homeowner has built up equity in their property, they have a portion of the property's value that they own outright. Equity loans, also referred to as home equity loans or equity lines of credit, allow homeowners to borrow against the equity they have in their property. These loans are secured by the property itself, using the homeowner's equity as collateral. Homeowners can use equity loans for various purposes, such as home improvements, debt consolidation, education expenses, or other major expenses. The amount that can be borrowed through an equity loan is typically based on the homeowner's equity in the property. One common type of equity loan is a home equity loan, where a fixed amount is borrowed and repaid over a specific period, similar to a traditional loan. Another type is a home equity line of credit (HELOC), which provides a revolving line of credit that homeowners can draw from as needed within a specified time frame. Equity loans are considered secured loans because they are backed by the property's value. The lender has the right to foreclose on the property if the borrower fails to repay the loan as agreed. In summary, loans that are made based on an owner's equity in real property are known as equity loans. These loans allow homeowners to borrow against the value they have built up in their property and can be used for various purposes.
Mortgage-related securities: a. are easily bought and sold. b. are issued by participants in the secondary market. c. have real estate mortgages as their collateral. d. all of the above.
c. have real estate mortgages as their collateral. Explanation: Mortgage-related securities have real estate mortgages as their collateral. Option c is the correct answer. Mortgage-related securities, also known as mortgage-backed securities (MBS), are financial instruments that represent an ownership interest in a pool of mortgage loans. These securities are created by packaging together a group of individual mortgage loans and selling them to investors. The underlying collateral of mortgage-related securities is a portfolio of real estate mortgages. This means that the payments and cash flows generated by the mortgage loans, such as principal and interest payments from homeowners, serve as the source of income for the investors who hold the securities. When homeowners make their mortgage payments, those payments are distributed to the holders of mortgage-related securities. The value and performance of these securities are tied to the performance of the underlying mortgage loans, including factors such as interest rates, default rates, and prepayment rates. Mortgage-related securities provide a way for lenders to transfer the risk associated with mortgage loans to investors in the secondary market. These securities are typically issued by participants in the secondary market, such as government-sponsored enterprises like Fannie Mae and Freddie Mac, as well as private financial institutions. Regarding option a, while mortgage-related securities can be bought and sold, their liquidity and ease of trading can vary depending on market conditions and the specific characteristics of the securities. In summary, mortgage-related securities have real estate mortgages as their collateral. They represent ownership interests in pools of mortgage loans and are issued by participants in the secondary market. These securities allow investors to gain exposure to the income and cash flows generated by the underlying mortgage loans.
The prime rate is the: a. rate of interest charged by the Fed to the banks. b. interest rate at which banks lend balances at the Fed to each other. c. lowest interest rate a bank charges its best customers. d. the interest rate the Fed charges the U.S. Treasury.
c. lowest interest rate a bank charges its best customers. Explanation: The prime rate refers to the lowest interest rate that commercial banks charge their most creditworthy customers, typically large corporations with strong credit profiles. It serves as a benchmark rate for various lending products offered by banks, such as business loans, personal loans, and credit cards. The prime rate is not directly determined or set by the Federal Reserve (Fed). Instead, it is established by individual banks based on several factors, including the federal funds rate. The federal funds rate is the interest rate at which banks lend balances to each other overnight to meet reserve requirements. However, it is important to note that the prime rate is not directly tied to the federal funds rate. Banks typically set their prime rates by adding a margin or spread to the federal funds rate or another benchmark rate. The specific margin can vary among banks and may change over time based on market conditions and the bank's own lending policies. As the prime rate is intended for the most creditworthy customers, it often serves as a reference point for other interest rates in the economy. Other loans and credit products, such as adjustable-rate mortgages and student loans, may be based on a certain percentage above the prime rate.
All state licensed MLOs must meet the following standards: a. be at least 21 years old. b. have a minimum of two years of experience in residential real estate lending. c. never have had a felony conviction in the past seven years. d. have never had a bankruptcy.
c. never have had a felony conviction in the past seven years. Explanation: State licensing requirements for Mortgage Loan Originators (MLOs) often include background checks to assess an individual's character and trustworthiness. While the specifics may vary by state, having a felony conviction within a certain timeframe, such as the past seven years, can be a disqualifying factor for obtaining an MLO license. Felony convictions are considered serious criminal offenses, and licensing authorities typically take them into account when evaluating an individual's suitability for working in the mortgage industry. The seven-year timeframe is often used as a benchmark to assess an applicant's recent criminal history.
An unincorporated association of real estate investors managed by a trustee is a: a. bank. b. real estate brokerage. c. real estate investment trust. d. mortgage company.
c. real estate investment trust (REIT). Explanation: An unincorporated association of real estate investors managed by a trustee is known as a real estate investment trust (REIT). Option c is the correct answer. A real estate investment trust is a type of company that owns, operates, or finances income-generating real estate. REITs pool capital from multiple investors and use it to invest in various types of real estate assets, such as residential properties, commercial properties, office buildings, shopping centers, or industrial facilities. The management of a REIT is typically handled by a trustee or a board of trustees, who are responsible for making investment decisions, managing the assets, and ensuring compliance with applicable laws and regulations. The trustee acts on behalf of the investors and is responsible for the overall management and administration of the REIT. One of the key characteristics of a REIT is that it distributes a significant portion of its taxable income to shareholders in the form of dividends. To qualify as a REIT, the company must meet certain requirements established by tax laws, such as distributing a minimum percentage of its income to shareholders and deriving a substantial portion of its income from real estate-related activities. In summary, a real estate investment trust (REIT) is an unincorporated association of real estate investors managed by a trustee. REITs pool capital from multiple investors to invest in income-generating real estate assets, and they distribute a significant portion of their income to shareholders in the form of dividends.
Collateralized mortgage securities are separated into different classes called: a. shelters. b. trenches. c. tranches. d. none of the above.
c. tranches. Explanation: Collateralized mortgage securities (CMS) are separated into different classes called tranches. Option c is the correct answer. Collateralized mortgage securities are financial instruments that are created by pooling together a large number of individual mortgage loans and then issuing securities that represent ownership interests in that pool. These securities are often referred to as mortgage-backed securities (MBS). The process of separating the mortgage securities into different classes or tranches is known as tranching. Tranching allows investors to choose from different risk and return profiles based on their investment preferences. Each tranche represents a different level of risk and has a distinct set of characteristics. The tranches are structured based on the cash flow priority of payments received from the underlying mortgage loans. Typically, there are multiple tranches within a collateralized mortgage security, and each tranche has a different priority in receiving interest payments and principal repayments. The tranches are structured in a way that prioritizes the payment distribution to investors, with higher tranches having a higher priority and lower tranches assuming higher risk. The tranching structure helps to allocate risk among investors and allows them to choose the level of risk and potential return that aligns with their investment objectives. Investors who prefer lower risk may invest in higher-rated tranches, while investors seeking higher returns may opt for lower-rated tranches. The tranching process helps to create a diverse range of investment options within collateralized mortgage securities, accommodating different risk tolerances and investment strategies. In summary, collateralized mortgage securities are separated into different classes called tranches. Tranching allows investors to choose from different risk and return profiles based on their investment preferences, enabling the creation of diverse investment options within the mortgage-backed securities market.
Predatory loan practices include: a. fraud. b. usury. c. deception. d. all of the above.
d. all of the above. Explanation: Predatory loan practices refer to unethical or exploitative lending practices that take advantage of borrowers. These practices can involve various deceptive or fraudulent tactics to exploit vulnerable individuals or groups. The options provided in the question—fraud, usury, and deception—all fall under the umbrella of predatory loan practices. Fraud: Predatory lenders may engage in fraudulent activities, such as providing false or misleading information about loan terms, misrepresenting the borrower's ability to repay, or falsifying documents. These actions are intended to deceive borrowers and induce them into accepting unfavorable loan terms. Usury: Usury refers to the charging of excessively high interest rates on loans. Predatory lenders may impose exorbitant interest rates that far exceed the market rates or the borrower's ability to repay. These high-interest loans can trap borrowers in cycles of debt and financial distress. Deception: Predatory lenders often employ deceptive practices to confuse or mislead borrowers. This can include hiding fees or charges, using complex or convoluted language in loan documents, or failing to disclose important information. The aim is to exploit borrowers' lack of understanding or awareness to their disadvantage. By combining all three practices—fraud, usury, and deception—predatory lenders seek to exploit vulnerable borrowers and extract excessive financial gain at the expense of the borrower's well-being and financial stability. It is important to recognize and avoid predatory loan practices to protect oneself from financial harm. Borrowers should always carefully review and understand loan terms, seek independent advice if needed, and choose reputable lenders that adhere to fair lending practices and regulations.
Prior to getting licensed by the NMLS all applicants must: a. complete 20 hours of pre-licensing education approved by NMLS. b. pass a 125 question national Uniform state test (UST). c. provide fingerprints for a FBI criminal background check. d. all of the above.
d. all of the above. Explanation: Prior to getting licensed by the Nationwide Multistate Licensing System & Registry (NMLS), all applicants are required to fulfill multiple requirements. These include completing 20 hours of pre-licensing education that is approved by the NMLS. Additionally, applicants must pass a 125-question national Uniform State Test (UST), which assesses their knowledge of mortgage laws and regulations at the national level. Lastly, applicants are also required to provide their fingerprints for an FBI criminal background check, which is conducted to ensure compliance with regulatory standards and consumer protection. Therefore, all applicants must complete the pre-licensing education, pass the national UST, and provide fingerprints for an FBI criminal background check before obtaining their license through the NMLS.
The primary market is made up of: a. first-time homebuyers. b. federal agencies. c. local lending institutions. d. none of the above.
d. none of the above. Explanation: The primary market refers to the market where newly issued securities, including loans, are created and sold for the first time. It is the market in which borrowers and lenders interact directly to originate loans or issue new securities. The options provided in the question—first-time homebuyers, federal agencies, and local lending institutions—do not accurately represent the primary market. Here's an explanation for each option: a. First-time homebuyers: First-time homebuyers are individuals who are purchasing a home for the first time. While first-time homebuyers are an important segment of the housing market, they do not represent the primary market as a whole. The primary market involves the origination and issuance of loans or securities, which may be utilized by various types of borrowers, not just first-time homebuyers. b. Federal agencies: Federal agencies, such as Fannie Mae, Freddie Mac, and Ginnie Mae, play a significant role in the secondary mortgage market by purchasing or guaranteeing mortgage-backed securities (MBS) and providing liquidity to the mortgage market. However, they are not considered part of the primary market. These agencies operate in the secondary market, where existing securities are bought and sold. c. Local lending institutions: Local lending institutions, such as banks, credit unions, and mortgage companies, are involved in originating loans and providing financing to borrowers. While they participate in the primary market by originating loans, the primary market is not limited to local lending institutions alone. It encompasses various lenders and financial institutions that participate in the origination and issuance of loans or securities. In summary, the primary market is not limited to first-time homebuyers, federal agencies, or local lending institutions. It refers to the market where new securities, including loans, are created and sold for the first time. It involves the origination and issuance of loans or securities by various entities, including lenders, financial institutions, and other market participants.
