Real Estate Dynamics CH 14 Quizzes - FINANCE

C

"Fannie Mae" and "Freddie Mac" are: * A. national mortgage bankers. B. second mortgage buyers. C. secondary markets for mortgages. D. government mortgage lenders.

C

A promissory note is: A. The lender's security for a loan made to finance the purchase of property B. One guaranteed or insured by a government agency C. The lender's evidence of a loan D. Automatically secured by a mortgage when signed by the property owner

B

A subdivision developer obtained a construction loan to build new houses on twenty lots. What type of clause might be required in the security instrument for the construction loan? * A. Subordination B. Partial release C. Exculpatory D. Safety

D

Before making a mortgage loan, a lender will be concerned with all of the following EXCEPT: A. Credit worthiness of the borrower B. Present and potential future value of the property C. The borrowers need for financial assistance with the down payment D. If the borrower is a male or female

D

Broker Baxter was asked by a purchaser to explain a budget mortgage. Baxter's best answer would have been: * A. one you can afford. B. a mortgage with graduated payments. C. a mortgage with interest only payments. D. a mortgage with payments including taxes and insurance.

B

By including an exculpatory clause in a mortgage contract, the lender: A. Waives the right to escalate the interest rate B. Releases the borrower from personal liability C. Agrees to permit an assumption to a qualified buyer D. Grants the borrower immunity from foreclosure

A

A trust deed gives the lender a right to request the trustee perform certain tasks in order to fulfill the terms of the trust. The trustee may take action in those circumstances because the trustee holds: * A. naked title. B. equitable title. C. reversionary title. D. public title.

C

A type of mortgage loan which provides for payment of interest only during its term is: A. A non-interest bearing loan B. An amortized loan C. A straight loan D. An installment loan

C

Denying a loan to a qualified borrower entirely on the basis of the particular neighborhood involved: A. Is an acceptable lending practice if the rate of foreclosure in that neighborhood is higher than the national average B. Is not illegal unless the practice is racially motivated C. Is a form of discrimination called redlining D. Is a lending practice prohibited by the Federal Equal Credit Opportunity Act

C

Falk purchased a vacant lot in a residential subdivision and later applied for an "interim loan." This loan was most likely a(n): A. Package loan. B. Open end loan. c. Construction loan. D. Blanket loan.

C

Fannie Mae does NOT: A. Participate in tandem plans with Ginnie Mae. B. Sell pools of seasonal loans to large investors. C. Lend money to residential borrowings. D. Buy FHA, VA and conventional loans.

A

If a purchaser assumes and agrees to pay an existing mortgage loan originally signed by the seller, then: A. The seller becomes secondarily liable to the lender B. The purchaser takes no personal liability for paying the debt C. The seller is released of all liability D. The purchaser is released of all liability

C

If the current conventional interest rate is 9 3/4%, how many discount points would be charged on a 9% VA loan in orders o offset the different for the lender? A. Two B. Four C. Six D. Eight

D

In order to determine exactly what portion of a mortgage loan the VA will guarantee on behalf of a qualified veteran, the veteran must apply for a: A. Certificate of reasonable value B. Release of liability C. Statement of entitlement D. Certificate of eligibility

C

In the secondary mortgage market, the function of the Federal National Mortgage Association is to: I. Lend money to institutional lenders. II.Buy and sell FHA, VA and conventional loans. Ill. Maintain a market where a profit is always made when lenders sell their mortgage notes. IV. Warehouse (pool) seasoned loans for investors to purchase. A I and II only B. Ill only C. II and IV only D. IVonly

D

Interest charged on real estate: A. Is generally simple interest, limited by state usury laws, and payable in advance. B. Is adversely affected by an increase in the supply of loanable funds. C. Generally declines in rate in direct proportion to the amortized balance of the note. D. May be augmented by discount points to increase the effective yield to the mortgagee.

B

Just before the sheriff begins the auction sale of foreclosed property, the delinquent borrower offers to pay the outstanding debt and all costs incurred because of the default. In such case: * A. the sale must proceed and the property sold to the highest bidder. B. the borrower may pay the judgment and reclaim the property under equitable rights of redemption. C. the borrower may pay the judgment and reclaim the property under statutory rights or redemption. D. the lender may choose to either accept payment or proceed with the auction.

D

Loan-to-value ratios are based on: * A. appraised value. B. contract price. C. appraised value or contract price, whichever is higher. D. appraised value or contract price, whichever is lower.

B

Real estate syndicates are: I. Often regulated by state blue sky laws. II. Generally formed as limited partnership. Ill. Never used to acquire real estate. A. I only B. I and II only C. II and Ill only D. I, II and Ill

D

Regarding the impounds a borrower might be required to pay the lender, which of the following is true? A. Impounds cover the cost of property taxes, hazard insurance, and reserves for replacement B. Lenders cannot charge impound fees for FHA and VA loans C. A loan that requires impounds is called a package mortgage D. The Real Estate Settlement Procedures Act (RESPA) regulates the amount lenders can collect for impounds

D

When a borrower pays off a note that was secured by a deed of trust, then: * A. the lender issues a release deed to the borrower. B. the borrower receives a document called a satisfaction piece. C. the deed of trust is cancelled. D. the trustee issues a deed of reconveyance to the borrower.

A

A phenomenon which adversely affect thrift institutions when investment alternatives are more attractive to depositors is called: A. Disintermediation B. A pass through C. Hypothecation D. Warehousing

D

A borrower will probably be asked to pay for mortgage insurance when arranging a conventional loan on a residential property when the loan amount will be _______ % of the loan-to-value ratio? A. Over 95% B. Over 90% C. Over 85% D. Over 80%

D

All of the following are true of an FHA insured loan EXCEPT: A. A prepayment penalty is not permitted B. If the property does not appraise for the full sales price, the buyer may rescind without penalty C. Both upfront and annual MIP will be required D. The loan is freely assumable by an investor as long as he has been qualified by the lender

A

An acceleration clause gives the lender the right to: * A. demand the entire balance owed due and payable upon default. B. adjust the amount of payments if interest rates increase. C. increase the interest rate upon assumption. D. charge a prepayment penalty if the loan is paid off before maturity.

B

Concerning a fully amortized loan, it is correct to say that it is a loan characterized by: * A. level payments with equal portions applied to interest and principal. B. level payments that cover all interest charged and reduce the principal to zero by maturity. C. payments of varying amounts necessary to cover interest and reduce principal to zero by maturity. D. level payments that first pay all interest owed over the term of the loan then pay off principal.

A

Owner Jim Dole has had foreclosure proceedings started against him for non-payment of his mortgage. He may redeem his property under the right of: A Equitable redemption. B. Deed in lieu of foreclosure. C. Statutory redemption. D. Power of sale.

A

Mason and Gilbert sign a promissory note jointly and severally to borrow $100,000 to finance the purchase of a property they will own equally. If Mason defaults, then: A. Gilbert is responsible for the entire debt B. Mason must deed one-half interest to Gilbert C. Only Mason is considered in default D. Gilbert may not sue Mason

C

Negative amortization is a loan feature which: A. Allows more of each monthly payment to be applied to the principal balance than the previous month B. Allows the principal to be paid off early C. Allows the principal balance to increase because payments are insufficient to pay the interest owed D. Allows the interest rate to increase

A

Nelson sells his home to Randall subject to an existing first mortgage loan he obtained five years ago. After nine months, Randall can no longer continue to make the monthly payments. Under these circumstances: A. The purchase has no liability to the lender B. The purchaser is solely liable to the lender C. The purchaser is primarily liable to the lender, and the seller is secondarily liable D. The seller is primarily liable to the lender, and the purchaser is secondarily liable

B

On a VA loan, who has the final decision on the amount of down payment a veteran should pay? A. Veterans Administration B. Lending Institution C. Veteran D. Government

C

One who, in good faith and without knowledge of defect, pays valuable consideration for a note before it is due is referred to as: * A. a receiver in trust. B. an endorser in blank. C. a holder in due course. D. an assignor.

C

Seller Bob wants to sell his house as soon as possible. He has an existing low interest loan on the property. The note contains an "alienation clause" which is triggered by a transfer of title. Under these circumstances which of the following is correct? * A. The lender may call the loan only if the buyer is an alien. B. The buyer who assumes the loan will make the same payments the seller has been making. C. The lender can refuse to allow an assumption. D. The lender may NOT require that the buyer qualify to assume the loan.

D

Stone purchased farm land from Fowler with the idea of developing it. Fowler took part payment in cash and the balance in the form of a note and mortgage. Which of the following clauses did Stone insist on including in the security instrument? * A. Alienation B. Subrogation C. Escalation D. Subordination

C

Straight-term loans are generally: * A. longer in duration than amortized loans. B. more popular now than amortized loans. C. shorter in duration than amortized loans. D. less costly to the borrower, all other conditions being equal.

C

The Federal Housing Administration was primarily created to: A. Provide funds for loans. B. Provide funds through a secondary market. C. Insure loans. D. All of the above.

C

The Truth in Lending Law (Regulation Z) covers which of the following? I. Business and commercial loans II. All personal or consumer loans in excess of $25,000. Ill. Disclosure of loan cost information to the borrower. IV. Credit terms in advertising A. I and II only B. II and Ill only C. Ill and IV only D. IVonly

A

The loan discount is: A. Prepaid interest collected by the lender B. A monthly fee paid by the borrower on an FHA loan C. A fee required by the VA D. The reduction you get if you have more than two loans

C

The mortgage insurance premium on an FHA loan is: A. Paid by the lender and the insurance protects the borrower upon default. B. Paid by the borrower and the insurance protects the borrower upon default. C. Paid by the borrower and the insurance protects the lender upon default. D. Paid by the Federal Housing Administration to protect the lender.

C

The cost of the FHA mortgage insurance is charged to: A. The Federal Housing Administration B. The lender C. The borrower D. The seller

D

The developer of low-income housing would most likely arrange financing subsidized by: A. A developer of low-income housing would most likely arrange financing subsidized by: A. GNMA B. FHLMC C. FNMA D. FHLB

C

The federal law that requires that the borrower receive a Good Faith Estimate within three days of loan application is known as: * A. the Federal Truth in Lending Law. B. the Equal Credit Opportunity Act. C. the Real Estate Settlement Procedures Act. D. the Federal Fair Housing Act.

C

The federal law that was passed as part of the Consumer Credit Protection Act is designed to allow the consumer to know and compare the exact cost of credit is known as: A. The Equal Credit Opportunity Act B. The Real Estate Settlement Procedures Act C. The Federal Truth in Lending Law D. The Housing and Economic Recovery Act

C

The funds used in FHA and VA loans are provided by: A. The FHA and VA federal agencies. B. The U.S. Treasury and HUD. C. Qualified lenders. D. Commercial banks.

D

The instrument, which pledges real property as security for a loan, is: * A. a mortgage. B. a trust deed. C. a promissory note. D. either a mortgage or a trust deed.

C

The interest rate on a $60,000 conventional loan is 12~% whereas the interest rate is 12 1/2% on a VA loan. A lender making VA loans would probably: A. Charge two discount points. B. Discount the loan to the borrower by $1,800. C. Charge three discount points which may be paid by borrower, or by someone on the borrower's behalf. D. Charge three discount points which would have to be paid by the seller.

B

The role played by the FHA in mortgage lending is primarily that of: * A. a banker. B. an insurer. C. an appraiser. D. a rules-maker.

B

Two different legal positions have developed regarding the lender's rights in property, where a mortgage has been given as security for a debt. Some states practice the lien theory of mortgage law while others follow the title theory. The difference is that: A. In lien theory states, the borrower conveys title to the lender B. In lien theory states, the lender has only a monetary claim to the property C. In title theory states, the borrower retains legal title D. In title theory states, the lender has only a monetary claim to the property

C

Under RESPA, which of the following statements is (are) true? I. Federal related loans are covered. II. It applies only to single family residences. Ill. Kickbacks are forbidden. IV. A good faith estimate of settlement costs must be given to borrower at the time of loan application, or within three business days. A. I only B. II only C. I, Ill and IV only D. II and Ill only

D

VA interest rates are set by: A. The agency for Housing and Urban Development (HUD). B. The Veteran's Administration 0/A). C. The Department of Veteran Affairs. D. · Qualified VA lending institutions based on supply and demand .

B

Vicki and Steven Barn's current home is listed with Jack Black of Best Deal Realty. They are selling because they will be retiring and are building a new home at the lake. Although the lake house is under construction, it will not be completed until December. In August, they receive an acceptable offer and the proposed closing date is September 15. The buyer offers to allow the Barns to lease the property after closing until their lake house is completed in December. If the buyer signs a required lender document at closing, confirming occupancy within 30 days, then: * A. no mortgage fraud will have been committed if the contract indicated the leaseback and a copy is provided to the lender. B. all parties, buyer, seller, and agent are guilty of mortgage fraud. C. the seller is not guilty of mortgage fraud because he did not know about the lender required occupancy until the closing. D. only the buyer has committed mortgage fraud.

A

What is the purpose of mortgage insurance? A. It protects the lender from loss if the borrower defaults. B. The lender is then willing to make a smaller loan on the property. C. It guarantees life insurance on the borrower. D. All of the above

D

When a lender's security instrument includes the power of sale and a borrower has failed to make payments on a loan with that lender, which of the following is true A. The lender cannot foreclose until the borrower has missed three consecutive payments B. Junior lien holders must be notified before a foreclosure sale can be held C. In order to foreclose on the loan, the lender must sue the borrower in court D. The lender is required to advertise before holding a foreclosure sale

A

When a trust deed is used to pledge real property as security for a loan, the lender is the: A. Beneficiary B. Trustor C. Trustee D. Mortgagee

B

When included in a loan agreement, this clause allows the lender to demand the entire loan balance due when the title is transferred. A. Acceleration clause B. Alienation clause C. Granting clause D. Escalation clause

B

Which of the following best expresses the relationship between the availability of mortgage money and the level of interest rates? * A. If the federal government debt were reduced, interest rates would rise. B. By lowering reserve requirements for member banks, the Federal Reserve System can lower interest rates. C. When money is abundant, interest rates remain stable. D. Borrowing by industry or by consumers has no effect on mortgage interest rates.

D

Which of the following characteristics apply to VA guaranteed loans? A. Each veteran is entitled to only on VA guaranteed loan B. Interest rates are determined and set by law C. A veteran borrower is automatically released of liability if another veteran later assumes the loan D. Spouses of veterans killed in the line of duty, who have not remarried, are eligible for VA loans

D

Which of the following loan money in the primary market? I. Commercial banks II. Saving & Loan associations Ill. Federal National Mortgage Association IV. · Mutual Savings banks A. I and II only B. II and Ill only C. I, Ill and IV D. I, II and IV

A

Which of the following loans would be covered by Regulation Z? * A. A loan to purchase a $20,000 car B. A purchase money mortgage for $125,000 for the purchase of a duplex C. A loan for $375,000 made for the purpose of purchasing a farm D. A loan of $215,000 to a builder for construction of a single family residential home

B

Which of the following loans would most likely require private mortgage insurance? * A.A FHA graduated payment plan mortgage B. A 90% LTV conventional loan C. A 100% LTV VA mortgage loan D. A purchase money second mortgage loan

B

Which of the following statements concerning conventional loans is (are) true? I. High loan-to-value ratio conventional loans are generally insured by private mortgage insurance. II. They are not insured or guaranteed by the federal government. Ill. They generally have lower interest rates than VA loans. IV. They always have a higher loan-to-value ratio than VA loans. A. I only B. I and II only C. II, Ill and IV D. I, II, Ill and IV

D

Which of the following statements concerning trust deeds and mortgages is (are) correct? : I. When a trust deed is the security instrument, the title to the property is held by the beneficiary. II. A mortgage always conveys title to the mortgagee and the mortgagor remains in possession. Ill. Upon default under a trust deed, the property may be sold at foreclosure by the trustor for the beneficiary. IV. A mortgage contains a defeasance clause. A. I only B. II only C. II and Ill only D. IVonly

B

Which of the following terms best describes a promissory note? I. Contract - personal obligation - security for debt II. Negotiable - evidence of debt -instrument Ill. A promise to pay - non-negotiable - secured by a mortgage A. I only B. II only C. I and II only D. I, II and Ill

B

Which of the following would be included in a mortgage, if used in a lien theory state? A. Defeasance clause B. Mortgaging clause C. Granting clause D. Discounting clause