Quiz1

_____________ is the condition which occurs when the market value of real estate is less than the mortgage which encumbers it.

Negative equity

_______________ is the lost interest which would have been earned by investing income instead of allocating it to building home equity.

Opportunity cost

Going into 2019, just over ____________ of California's homeowners were underwater on their homes.

2%

Typically, lenders will allow no more than __________ of a homebuyer's monthly gross income to be used on a monthly mortgage payment.

31%

___________ is an increase in the general price level of all goods and services in the economy.

Consumer price inflation

__________ are overnight funds lent to banks with insufficient reserves by the Federal Reserve (the Fed) and banks with excess reserves.

Federal funds

An adjustable rate mortgage (ARM) with a shorter introductory period typically has:

a lower teaser rate.

The two basic categories of interest rates are:

a) long-term and short-term.

The Buy Phase, the ideal moment for buying property, is characterized by cyclically low prices and:

a) low interest rates. b) few willing buyers. c) Both a. and b.

The loss of jobs affects ___________ real estate

a) only single family residential (SFR).b) only commercial c) all types of

The gross revenue multiplier (GRM) is calculated by dividing the:

asking price of a residence by the annual rent it or a comparable property commands.

A(n) _______ is able to be used again and again over a long term and is subject to deterioration and obsolescence.

asset

A speculator's delegation of a purchase agreement's obligations to a substitute buyer is known as a(n):

assumption.

The yield spread is the difference between the 10-year Treasury note rate and the:

b) 3-month Treasury bill rate.

A buyer other than the mortgage holder who purchases a property for value at a trustee's sale without notice of title or trustee's sale defects is referred to as a(n):

bona fide purchaser (BFP).

When employment is rising and prices remain low, real estate investors can prepare for a:

buy phase.

The U.S. economy functions on a ___________ interest rates cycle.

c) 60-year

A _____________ arrangement requires the substitute buyer rise to the same standards of creditworthiness and care of property as the original buyer.

carryback financing

The basis for an individual's __________ is a paycheck, self-employed earnings from a trade or business, or income from investments.

creditworthiness

An extreme imbalance in supply and demand is referred to as:

disequilibrium.

Of all the economic factors, __________ has the most impact on the vigor of the California real estate market.

employment

When purchasing a residential property from a seller-in-foreclosure, a speculator is subject to ______________ laws, which protect vulnerable sellers.

equity purchase (EP)

The liquidity trap is a condition occurring when injections of cash into the banking system ______ lending and economic growth.

fail to stimulate

When consumer confidence is running high, the rate of personal savings:

falls.

California's gross domestic product (GDP) is growing ___________ than personal incomes.

faster

The phenomenon of increasingly larger mortgage amounts due to increasingly inflated prices of the same collateral is called the:

financial accelerator effect.

Renters-by-necessity are ___________ to purchase a home.

financially unable

A _____________ temporarily reduce a homeowner's mortgage payment, but it does not permanently alter the mortgage terms.

forbearance agreement

Unlike during the Millennium Boom, the ability to repay rules now require adjustable rate mortgages (ARMs) to be approved at the _______ after five years from the date of the first payment.

fully indexed rate

The Federal Reserve's (the Fed's) practice of charging interest on the excess reserves of lenders to stimulate lending activity is known as:

going negative.

An asset that cannot be converted easily into cash without taking a loss is called a(n):

illiquid asset.

The dollar amount an owner receives by occupying the space themselves is called:

implicit rent

The Federal Reserve (the Fed) controls inflation by controlling the amount of money:

in circulation.

When an adjustable rate mortgage (ARM) adjusts, the rate of adjustment is based on the ______ chosen by the lender upon origination.

index

Agents in urban areas would be wise to consider adding ______ to their title, as demand for this skill will rise throughout this decade as rentals emerge as significant profit centers.

property manager

"QRM" in the mortgage industry stands for:

qualified residential mortgage.

The desired fixed rate of return on the investment in excess of the future rate of inflation is known as the:

real rate of return.

Deregulation in the lending industry between 1982 and 2007 permitted and encouraged:

reckless lending.

Pools of mortgage-backed bonds (MBBs) are sold to banking institutions and investors in a process called:

securitization.

The alternative to a real estate loan as a source of additional capital is:

seller financing.

Compared to the rest of the nation, the rise and fall in home prices experienced in California during the years leading up to the Great Recession was:

severe.

During the coming decade a buyer will generally need to stay in the property for a minimum of ___________ years to break even.

six or seven

Investment in property aesthetics and the appearance of family stability are types of _____ favorably associated with owning a home.

social amenities

The capital adequacy ratio addresses a bank's level of:

solvency.

A __________ is a worksheet used to list in dollar amounts all a homeowner's assets and liabilities.

statement of financial position

The temporary, low initial interest rate found in adjustable rate mortgages (ARMs) is called a:

teaser rate.

A real estate mortgage appears as a ___________ on title to a property allowing the lender to enforce the mortgage by nonjudicial foreclosure.

trust deed lien

A __________ is a transaction in which sales proceeds are reinvested by acquiring like-kind property and the profits on the sale are deferred until the investment is cashed out.

§1031 transaction

The percentage of the California population who owned their homes peaked in 2006 around:

61%

The share of mortgage loans classified as adjustable rate mortgages (ARMs) reached ______ at the height of the Millennium Boom.

75%