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Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government? A) conventional home loan B) Federal Housing Administration loan C) Veterans Affairs loan D) Section 203 loan
A) conventional home loan
Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual's credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the: A) demand clause. B) insurance clause. C) escrow clause. D) exculpatory clause.
A) demand clause.
A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the: A) mortgage (Deed of Trust). B) listing contract. C) note. D) assignment of mortgage.
A) mortgage (Deed of Trust).
Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the typical industry margin is: A) 75 basis points. B) 175 basis points. C) 275 basis points. D) 375 basis points.
C) 275 basis points.
When a borrower defaults on a mortgage loan, his or her credit record will be adversely affected. While borrowers can recover from this reduction in their credit score, if a default goes into the borrower's records it will remain for: A) 6 months. B) 1 year. C) 5 years D) 7 years.
D) 7 years.
The Truth in Lending Act gives borrowers _____ days to change their mind and rescind certain mortgage loans. a. 3 b. 7 c. 10 d. 15
a. 3
If the lender in a standard first mortgage wishes to foreclose cost effectively, it is crucial to have which clause in the mortgage? a. Acceleration clause b. Exculpatory clause c. Demand clause d. Defeasance clause e. Taking clause
a. Acceleration clause
An old, vacant movie theater was refurbished and is now a high-end restaurant. This example best describes a. Adaptive reuse b. Remodeling c. Rehabilitation d. Modernization
a. Adaptive reuse
A contractual relationship in which an individual must act in the best interests of a principal when dealing with a third party is termed: a. An agency relationship b. A lease arrangement c. A tenant-landlord relationship d. A joint venture contractual arrangement
a. An agency relationship
The professional designation for individuals who manage larger residential, office, industrial, or warehouse properties is the a. CPM b. AMO c. ARM d. RPA
a. CPM
From a home mortgage lender's perspective, which statement is true about the effect of bankruptcy upon foreclosure? a. Chapter 7 bankruptcy is the most lender friendly form b. Chapter 11 bankruptcy is the most lender friendly form c. Chapter 13 bankruptcy is the most lender friendly form d. All forms of bankruptcy are equally devastating to a lender's efforts to foreclosure e. No form of bankruptcy causes serious problems for a lender seeking to foreclose a mortgage
a. Chapter 7 bankruptcy is the most lender friendly form
The problem of lenders denying loans of applicants who live in a certain area or neighborhood, even though the applicant is financially qualified has been addressed by the a. Community Reinvestment Act. b. Truth-in-Lending Act. c. Equal Credit Opportunity Act. d. Real Estate Settlement Procedures Act.
a. Community Reinvestment Act.
Repairing a leaky roof after a hail storm is an example of ____________ maintenance. a. Corrective b. Preventive c. Routine d. Custodial
a. Corrective
The accumulated future value of an initial lump-sum investment will be highest when interest is compounded a. Daily b. Monthly c. Quarterly d. Annually
a. Daily
In virtually all home mortgage loans, the items that must be accounted for as upfront expenses are governed by a. Federal Reserve Regulation Z. b. Freddie Mac c. RESPA d. The ECOA
a. Federal Reserve Regulation Z.
The dominant loan type originated by most financial institutions is the: a. Fixed-payment, fully amortized mortgage b. Adjustable rate mortgage c. Purchase-money mortgage d. FHA-insured mortgage
a. Fixed-payment, fully amortized mortgage
Which of these aspects of a mortgage loan will be addressed in the note rather than in the mortgage? a. Prepayment penalty b. Escrow requirement c. Takings d. Acceleration e. Maintenance of property
a. Prepayment penalty
John purchased a property that has an existing mortgage. While he has agreed to make the payments in accordance with the terms of the note, he bears no personal liability in the event he defaults. In this example, John is said to have purchased the property a. Subject to the existing mortgage. b. By assumption of the existing mortgage. c. Notwithstanding the existing mortgage. d. In lieu of the existing mortgage.
a. Subject to the existing mortgage.
Brokers or agents that specialize in helping tenants find suitable space are called a. Tenant reps b. Asset managers c. Property managers d. Investment managers
a. Tenant reps
The required calculation of annual percentage rate (APR) by the lender is a result of: a. The Truth-in-Lending Act of 1968 b. The Real Estate Settlement Procedures Act of 1974/1977 c. The Equal Credit Opportunity Act of 1974 d. State real estate licensing laws e. Rules of the Federal Trade Commission
a. The Truth-in-Lending Act of 1968
Which item is included when calculating both EBC and lender's yield? a. discount points b. mortgage insurance c. recording fees d. title insurance
a. discount points
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Georgia, this right only extends to the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: a. equity of redemption b. statutory redemption c. strategic default d. substantive default
a. equity of redemption
Which is NOT a characteristic of investment-grade properties? a. values in excess of $1,000,000 b. fully or substantially leased c. located in major metropolitan areas d. lowest risk real estate investments available
a. values in excess of $1,000,000
Maryann has a partially amortizing mortgage loan with the following information: Loan amount: $150,000 Note rate: 7.5% Monthly payment: $1,048.82 Amortization period: 30 years Term to maturity: 10 years What will be the balloon payment due when the loan matures at the end of year ten? a. $150,000 b. $130,192 c. $125,200 d. $88,358
b. $130,192
A characteristic of a partially amortized loan is: a. No loan balance exists at the end of the loan term b. A balloon payment is required at the end of the loan term c. All have adjustable interest rates d. All have a loan term of 15 years e. None of the above
b. A balloon payment is required at the end of the loan term
An asset manager's responsibilities would NOT include decisions pertaining to a. The timing of capital expenditures. b. Advertising alternatives to find new tenants. c. Expanding the number of rental units within the complex. d. Converting from rental units to condominium ownership.
b. Advertising alternatives to find new tenants.
The Institute of Real Estate Management (IREM) awards which of the following designations? a. REM b. CPM c. MAI d. RPA
b. CPM
A court-supervised workout of a financially troubled business is _______________ bankruptcy. a. Chapter 7 b. Chapter 11 c. Chapter 13 d. Chapter 15
b. Chapter 11
Property manager's fees are typically based on a percentage of the property's a. Net operating income b. Effective gross income c. Potential gross income d. After-tax cash flow
b. Effective gross income
The element of an adjustable interest rate that is the "moving part" is the: a. Teaser rate b. Index c. Margin d. Adjustment period e. None of these
b. Index
Which statement is correct about the right of prepayment of a home mortgage loan? a. All home mortgage loans have the right of prepayment without charge b. Most home mortgage loans have the right of prepayment without charge, but not all, and the borrower should check the loan carefully c. Home mortgage loans give the right of prepayment without charge only in some states d. Home mortgage loans never have the right of prepayment without charge unless it is explicitly stated e. Home mortgage loans never have the right of prepayment without charge
b. Most home mortgage loans have the right of prepayment without charge, but not all, and the borrower should check the loan carefully
The _________________ of an investment alternative is defined as the difference between the present value of the cash inflows and the present value of the cash outflows. a. IRR b. NPV c. Investment value d. Net sale price
b. NPV
The most typical adjustment interval on an adjustable rate mortgage (ARM) once the interest begins to change is: a. Six months b. One year c. Three years d. Ten years e. None of the above
b. One year
Artificially low, temporary introductory rates used in many adjustable rate mortgages are called: a. Token rates b. Teaser rates c. Nominal rates d. Marginal rates
b. Teaser rates
In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: a. rescinding b. redlining c. tassuming d. holdout.
b. redlining
If the going-in IRR of an investment opportunity exceeds the investor's required rate of return on similar projects of equivalent risk, the investor a. should reject the investment opportunity. b. should accept the investment opportunity. c. would be indifferent toward the investment opportunity. d. should select a different type of investment.
b. should accept the investment opportunity.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: a. equity of redemption b. statutory redemption c. strategic default d. substantive default.
b. statutory redemption
On a level-payment loan with 12 years (144 payments) remaining, at an interest rate of 9 percent, and with a payment of $1,000, the balance is: a. $144,000 b. $100,000 c. $87,871 d. $76,137
c. $87,871
The most internationally oriented index rate for adjustable rate mortgages is: a. Federal Home Loan Bank cost of funds index b. Treasury constant maturity rate c. A LIBOR rate d. A home mortgage loan interest rate index e. The Wall Street Journal prime rate
c. A LIBOR rate
A partially amortizing loan always will have: a. Caps b. Only one state term c. A balloon payment d. A prepayment penalty e.. Recourse
c. A balloon payment
The requirement of a real estate property manager to act in the best interests of the landlord when dealing with a tenant is termed: a. An associate responsibility b. Due process c. A fiduciary responsibility d. An implied responsibility
c. A fiduciary responsibility
What clause in a mortgage allows the lender to declare the entire balance due and payable if the borrower misses a payment? a. Prepayment penalty b. Exculpatory clause c. Acceleration clause d. Granting clause
c. Acceleration clause
Remodeling and rehabilitation: a. Are preventive measures undertaken to prevent a loss in value b. Are most likely categorized as operating expenses c. Are expected to add value to the property if undertaken d. Can usually be undertaken by the property manager without consulting the owner or asset manager
c. Are expected to add value to the property if undertaken
When a lender allows a defaulted borrower to simply convey the property to the lender, this is referred to as a. Non-judicial foreclosure. b. The statutory right of redemption. c. Deed in lieu of foreclosure. d. Equity of redemption.
c. Deed in lieu of foreclosure.
With what type of loan security arrangement is the deed held by a neutral party and returned upon payment of the mortgage in full? a. Contract for deed b. Mortgage c. Deed of trust d. Nonrecourse loan e. Recourse loan
c. Deed of trust
A lender may reserve the right to require prepayment of a loan at any time they see fit through a(n): a. Taking clause b. Acceleration clause c. Demand clause d. Due-on-sale clause e. Escrow clause
c. Demand clause
Lender's yield differs from effective borrowing costs (EBC) because: a. Lender's yield is strictly a yield to maturity and EBC is not b. EBC is strictly a yield to maturity and lender's yield is not c. EBC accounts for additional third-party up-front expenses that lender's yield does not d. Lender's yield accounts for additional third-party up-front expenses that EBC does not
c. EBC accounts for additional third-party up-front expenses that lender's yield does not
The characteristics of a borrower than can be considered by a lender in a mortgage loan appreciation are limited by the: a. Truth-in-Lending Act b. Real Estate Settlement Procedures Act c. Equal Credit Opportunity Act d. Home Ownership and Equity Protection Act e. Community Reinvestment Act
c. Equal Credit Opportunity Act
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the: a. one-year U.S. Treasury constant maturity rate b. prime rate c. London Interbank Offered Rate (LIBOR) d. cost-of-funds index.
c. London Interbank Offered Rate (LIBOR)
From an economic point of view, which activity is regarded as an undertaking to prevent a loss in value, rather than an activity undertaken to add value to the property? a. Remodeling b. Rehabilitation c. Maintenance d. Modernization
c. Maintenance
The asset manager is generally NOT responsible for: a. Finding properties for the investor/principal b. Arranging financing for properties c. Making maintenance decisions d. Overseeing the due-diligence of the purchase for the investor/principal
c. Making maintenance decisions
Both the owner and the manager may be better off if property management compensation were based on a percentage of the property's: a. Potential gross income b. Effective gross income c. Net operating income d. Market value
c. Net operating income
The selection of certain tenants for a retail center that will promote a complementary relationship between each type of business is called a. Interlease synergy b. Retail mix c. Tenant mix d. Complementary effect
c. Tenant mix
The following are necessary for a lease to be valid, except: a. Consideration b. Written leases, if longer than one year, in most states c. Tenant's contact phone number, or address, in the event of an emergency d. Statements to the effect that the tenant agrees to lease the property for a specified period and that the owner and the tenant agree to the terms of the rent
c. Tenant's contact phone number, or address, in the event of an emergency
For non-real estate corporations, which of following is not a potential advantage of a real estate sale-leaseback? a. The form can convert an illiquid asset into cash b. More of the firm's capital can be invested in its core business c. The firm benefits from property appreciation that occurs after the sale-leaseback d. The firm may reduce its overall financing costs
c. The firm benefits from property appreciation that occurs after the sale-leaseback
The Truth in Lending Act gives a home mortgage borrower how long to rescind a mortgage loan? a. 24 hours b. Two days c. Three days d. A week e. A month
c. Three days
Which statement about sale-leasebacks is FALSE? a. Sale-leaseback is a useful method to meet rising debt obligations. b. Sale-leaseback can provide funding for business expansion. c. Under a sale-leaseback, the corporation gives up control of the property to the investor/owner. d. Sale-leaseback transactions generally require the corporate tenant to enter into a net lease agreement with the investor/owner.
c. Under a sale-leaseback, the corporation gives up control of the property to the investor/owner.
Foreclosure is considered the ultimate recourse of the lender because it allows the lender to bring about sale of the property to recover the outstanding indebtedness. All of the following statements regarding foreclosure are true EXCEPT: a. Foreclosure is a costly process for all parties involved b. Only those claimants who are properly notified and engaged in the foreclosure suit can lose their claims to the property c. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property d. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of the outstanding loan balance and commonly is much less than this amount.
c. When a lender forecloses on a property, it extinguishes all superior liens, bringing about a free and clear sale of the property
Demolition of an existing property on an urban site will likely occur: a. After the building has been abandoned for a reasonable period of time b. When the highest and best use of the property is a taxypayer use, such as a parking lot or recreational park c. When the site value, assuming a new use, exceeds the value of the rise under its existing use, plus the cost of demolition d. When the site value, under its existing use, exceeds the cost of demolition
c. When the site value, assuming a new use, exceeds the value of the rise under its existing use, plus the cost of demolition
Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of the property. Which of the following types of loans is the most likely to contain a due-on-sale clause? a. Federal Housing Administration (FHA) loan/ b. Veterans Affairs (VA) loan c. conventional home loan d. an assumable home loan
c. conventional home loan
For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? a. yield-maintenance prepayment penalties b. prepayment lockout c. defeasance prepayment penalty d. curtailment penalty
c. defeasance prepayment penalty
The market determined interest rate that is the "moving part" in an adjustable rate mortgage is more commonly referred to as the: a. teaser rate b. margin c. index rate d. cap rate.
c. index rate
In a mortgage loan agreement, the financial rights and obligations of borrower and lender are detailed in the: a. mortgage (Deed of Trust) b. listing contract. c. note. d. assignment of mortgage
c. note.
Using the loan information below, calculate the EBC if the borrower prepays the loan at the end of year 6. Loan amount: $195,000 Term: 30 years Interest Rate: 7% Monthly payment: $1,297.34 Discount pts: $3,900 Additional closing costs: $5,100 a. 6.79% b. 7.29% c. 7.56% d. 8.00%
d. 8.00%
On the following loan, what is the best estimate of the effective borrowing cost if the loan is prepaid in six years?Loan: $100,000 Interest rate: 7 percent Term: 180 months Up-front costs: 7 percent of loan amount a. 8.2% b. 8.4% c. 8.5% d. 8.7% e. 9.0%
d. 8.7%
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? a. one day b. 30 days c. 60 days d. 90 days
d. 90 days
If a homeowner in mortgage distress owes more than the value of the home, and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All of the following statements are true regarding a short sale EXCEPT: a. Legal costs should be lower with a short sale than with foreclosure b. A short sale usually enables a better sale price and a faster sale than foreclosure c. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner d. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
d. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.
Ways that a lender may respond yo a defaulted loan without resorting to foreclosure include all of the following except: a. Offer credit counseling b. Allow short sale to a third party c. Defer or forgive some of the past-due payments d. Accelerate the debt e. Accept a deed in lieu of foreclosure
d. Accelerate the debt
The problem of negative amortization is that: a. Interest payments made are less than the interest actually due. b. The borrower may end up paying interest ON interest. c. The loan balance may increase above the initial loan amount. d. All of the above are true
d. All of the above are true
If a mortgage is to mature (i.e. become due) at a certain future time without any reduction in principal, this is called: a. A second mortgage b. An amortized mortgage c. A limited reduction mortgage d. An interest-only mortgage e. An open-end mortgage
d. An interest-only mortgage
Which of the following statements is true about 15-year and 30-year fixed-payment mortgages? a. Thirty-year mortgages are more popular than 15-year mortgages among homeowners who are refinancing b. Borrowers pay more total interest over the life of a 15-year mortgage than on a 30-year loan, all else being equal c. The remaining balance on a 30-year loan declines more quickly than an otherwise equivalent 15-year mortgage d. Assuming they can afford the payments on both mortgages, borrowers usually should choose a 30-year mortgage over an otherwise identical 15-year loan if their discount rate (opportunity cost) exceeds the mortgage rate
d. Assuming they can afford the payments on both mortgages, borrowers usually should choose a 30-year mortgage over an otherwise identical 15-year loan if their discount rate (opportunity cost) exceeds the mortgage rate
A common risk that frequently interferes with a lender's efforts to work out a defaulted loan through either nonforeclosure means or foreclosure is: a. Equity of redemption b. Statutory right of redemption c. Exculpatory clauses d. Bankruptcy e. Deficiency judgement
d. Bankruptcy
To finance property where either the borrower, the property, or both fail to qualify for standard mortgage financing, a common non mortgage solution is through the: a. Subprime loan b. Deed of trust c. Unsecured loan d. Contract for deed e. Balloon loan
d. Contract for deed
Credit tenants can be characterized by all of the following statements EXCEPT: a. The general debt obligations of credit tenants are rated "investment grade" by one or more US rating agency. b. Credit tenants are judged to be creditworthy enough to borrow at preferred rates. c. During "normal" times, credit tenants are unlikely to default on a lease obligation. d. Credit tenants are the preferred tenants for residential properties.
d. Credit tenants are the preferred tenants for residential properties.
The law that prohibits discrimination in lending based on the applicant's receipt of income from a public assistance program is the a. Home Ownership and Equity Protection Act. b. Truth-in-Lending Act. c. Consumer Credit Protection Act. d. Equal Credit Opportunity Act.
d. Equal Credit Opportunity Act.
Which of these points in a mortgage loan would be addressed in the mortgage (possibly in the note as well)? a. Loan amount b. Interest rate c. Late fees d. Escrows e. Loan term
d. Escrows
Foreclosure tends to be quickest in states that: a. Are title theory states b. Are lien theory states c. Have judicial foreclosure d. Have power of sale e. Have statutory redemption
d. Have power of sale
Which of these is not typically a responsibility of a property manager? a. Marketing and leasing b. Tenant relations c. Maintenance programs d. Income tax analysis
d. Income tax analysis
A type of loan that has grown in volume in recent years which has raised concerns about predatory lending practices was the: a. Adjustable rate mortgage b. Contract for deed c. Purchase money mortgage d. Subprime mortgage e. Power of sale mortgage
d. Subprime mortgage
Which rate, required by the Truth-in-Lending Act, assumes no prepayment and is based on the term of the loan to maturity? a. effective borrowing cost b. equivalent interest rate c. lender's yield d. annual percentage rate
d. annual percentage rate
If the proceeds of a foreclosure sale are insufficient to satisfy the remaining loan balance, the lender a. May obtain a deficiency judgment against the defaulted borrower. b. May not have recourse against the defaulted borrower. c. May have to write off the remainder as an uncollectible debt. d. any of the above
d. any of the above
Which of the following loan clauses releases the borrower from liability for fulfillment of the mortgage loan contract? a. demand clause b. insurance clause c. escrow clause d. exculpatory clause
d. exculpatory clause
The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following? a. defeasance b. yield maintenance provision c. demand clause d. lockout provision
d. lockout provision
Given a fully amortizing loan, which type of loan repayment schedule would result in the least amount of interest being paid over the life of the loan? a. annual principle payments b. semi-annually principle payments (every 6 months) c. quarterly principle payments d. monthly principle payments
d. monthly principle payments
Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: a. fully amortizing b. partially amortizing c. nonamortizing d. negatively amortizing.
d. negatively amortizing.
It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? a. offer b. acceptance c. possession of the property passes to the buyer d. title to the property passes to the buyer
d. title to the property passes to the buyer
The Real Estate Settlement Procedures Act does which of these: a. Requires the use of a standard settlement statement for a mortgage loan closing b. Prohibits kickbacks between vendors of closing-related services and lenders c. Requires that a borrower receive a good-faith estimate of closing costs shortly after a loan application d. Requires that the borrower be able to inspect the closing statement a day before the actual closing e. All of the above
e. All of the above
Which of these statements is true about mortgage loans for income producing real estate? a. They usually are partially amortizing loans b. They often have a prepayment penalty c. They often are nonrecourse loans d. They can be interest only loans e. All of the above
e. All of the above
Adjustable rate mortgages (ARMs) commonly have all the following except: a. A teaser rate b. A margin c. An index d. A periodic interest rate cap e. An inflation index
e. An inflation index
When a buyer of a property with an existing mortgage loan acquires the property without signing the note for the existing loan, the buyer is acquiring the property: a. By assumption b. By contract for deed c. By deed of trust d. By default e. Subject to the mortgage
e. Subject to the mortgage
