CA 45 - Hour Real Estate Finance Course

A long-term security issued by the Treasury that has a maturity of 30 years is called a Treasury ______.

Bond

Which of the following statements about the lending process are also true? Select all that apply. -Lenders generate additional funds to loan to consumers by selling mortgages to players in the secondary mortgage market. -Without consumer deposits and revenue from both interest and mortgage sales, lenders would eventually run out of funds to loan to consumers.

Both apply

When HUD pursues actions that are designed to reduce housing discrimination and help communities recover from disasters, which of its goals is it supporting?

Build strong, resilient, and inclusive communities

Which agency is responsible for the production of paper currency?

Bureau of Engraving and Printing

Most consumers pay cash for houses? True or False.

False

Building standards

Local level

The two most common methods used when a bank fails are the payout method and the ______ method.

Purchase and assumption

HUD's second goal in support of its mission is to meet the need for ______ homes.

Quality affordable rental

Which of the following resources are extremely helpful when working with investors?

REIT analysts and bond rating agencies

In what phase of the real estate cycle do foreclosures increase and home prices fall?

Recession

Fannie Mae

Secondary market

Federal Home Loan Bank

Secondary market

MBS investors

Secondary market

If the Treasury encounters a deficit, what actions might it take?

Sell securities

Which of the following is a likely result if Federal Home Loan Banks did not exist?

There'd be fewer funds available for lending in the community.

Some of these activities will generally occur when new homes are constructed. Which of these phases have an effect on the economy? - Planning -Building -Buying/ selling -Moving -Living

All of them

Property pledged without obtaining a loan.

Collateral

When obtaining a mortgage to purchase a home, for what does the borrower use the property?

Collateral

Real estate financing mimics a cash-oriented structure. True or False

False

One of the following entities is primarily a secondary market player. Which one?

Freddie Mae

Pledge of property as collateral for a loan.

Hypothecation

Engineers, city, and/ or county officials map out local development.

Planning

Banks

Primary market

What is the most likely effect when the Fed sells securities on the open market?

The economy may slow down due to a decreased money supply.

As a nation we heavily rely on credit. True or False.

True

Banks use deposits from savers to lend money to borrowers to purchase a house. True or False.

True

Charity's existing mortgage interest rate is 4.75%. Current interest rates of 3.25% may entice her to refinance her loan. True or False.

True

Lenders often package mortgages to sell on the secondary market. True or False.

True

Local lenders may sell loans they have issued to national institutions as a way to generate more money to make additional loans.

True

Real estates activities have an impact on the economy. True or False?

True

The supply of properties available in the market is greater than the number of buyers. What type of market does this describe?

Buyer's market

Consumers work with real estate professionals, lenders, home inspectors, etc., to purchase or sell home.

Buying/ selling

Long periods of disintermediation can stimulate the economy. True or False.

False

Residents enjoy local amenities and services.

Living

Consumers make an arrangements to occupy or leave the property.

Moving

In which phase of the real estate market would you expect to see unemployment increasing, prices falling, and foreclosures on the rise?

Recession

Several different phases make up the real estate cycle. What are they? Select all that apply. - Expulsion - Over supply - Inflation - Recession - Expansion - Recovery

- Over supply - Recession - Expansion - Recovery

Which event led to the establishment of the FDIC?

Bank failures during the Great Depression

Credit unions

Primary market

Which of these best describe the term disintermediation? - When bank deposits are greater than bank withdrawals. -When bank deposits are equal to bank withdrawals. - When bank deposits are less than bank withdrawals.

Answer: When bank deposits are less than bank Withdrawals. note: If consumers are withdrawing more than they're depositing, this means the bank has less money to loan to others. In other words, there's less credit available to consumers. Less credit means less spending, causing a slowdown in the economy.

Economic events

Any level

Environmental regulations

Any level

Which of the following is a likely effect when the discount window is closed?

Banks don't have access to additional funds.

Engineers, contractors, and other workers build properties and infrastructure.

Construction

Which of the following items directly influences real estate supply?

Construction

Which of the following actions did the Federal Reserve take in response to the 2007 financial crisis?

Decreased rates

The borrower's interest in a mortgaged property.

Equitable title

In which phase of the real estate market would you expect to see an increase in hiring and employment, increased public confidence, and an increase in buyers in the market?

Expansion

Now we're talking! Public confidence is increasing, and we're finally starting to see some properties moving. More buyers in the market mean a reduction in the high number of properties that have been sitting on the market.

Expansion

What do loans create for banks and other financiers?

Future cash income

Real estate professionals keep a multitude of other professionals busy during the buying and selling process. Which of these professionals or entities are most active during the construction phase of real estate?

General Contractors

Which of these HUD programs allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market?

Ginnie Mae

Borrowing is more expensive. High Rates or Low Rates

High Rates

Fewer buyers are in the market.

High Rates

Which of the following was created as part of the Homeowner Affordability and Stability Plan?

Home Affordable Modification Program (HAMP)

Which of the following is a possible result of a community growing too fast?

Inadequate resources to support the population

As interest rates fall, what is the number of buyers in the market likely to do?

Increase

Historically, what do property values tend to do over long periods of time?

Increase

David purchased a house three years ago for $300,000. Considering historical property value fluctuations, what is the likely value of the property today?

It's difficult to tell. Historically, property values fluctuate up and down in the short term.

Controlling a large investment with a small amount of funds.

Leverage

The ease with which an asset is converted to cash is called ______.

Liquidity

During which phase of the real estate cycle do residents engage with local amenities and services?

Living

Employment trends

Local level

Zoning ordinances

Local level

Home ownership is more affordable.

Low Rates

More homeowners are refinancing.

Low Rates

An intermediate-term security issued by the Treasury that has a maturity term of between two and 10 years is called a Treasury ______.

Note

Which HUD program is responsible for developing and enforcing federal fair housing policies and laws?

Office of Fair Housing and Equal Opportunity

Roger has a sufficient income, has never missed a loan or credit payment, and has an adequate credit history. His credit score makes him a very creditworthy consumer. When obtaining a loan, which rate will he most likely get?

Prime rate

When are things in the real estate market going to pick up? There are so many houses on the market, with many sitting vacant because everyone is too scared to buy. This does nothing to help the increasing number of foreclosures. Deals can be had for those who are ready to buy, however. During this phase, prices tend to fall in order to encourage home shoppers to buy

Recession

In which phase of the real estate market would you expect to see unemployment and foreclosures remain high but begin to stabilize?

Recovery

What step of the real estate cycle generally follows a recession?

Recovery

In addition to lending money to member banks, FHLBanks also do which of the following?

Set rules and regulations that member banks must follow

Which of the following best describes a buyer's market?

Supply is greater than demand

Which act exempted homeowners from paying taxes on capital gains up to a specified value?

Taxpayer Relief Act of 1997

What is the purpose of the Federal Reserve System?

The Fed regulates the U.S. depository institutions.

Which of the following describes the prime rate?

The rate at which a bank or lender may loan money to its most creditworthy borrowers

Larry obtained a mortgage from State Bank. Larry owns the property, controls it, and has all the rights that come along with real property ownership. State Bank has an interest in the property and one other right. What is that?

The right to foreclose if the borrower defaults.

Selling mortgage-backed securities provides national institutions in the secondary market with additional funds to continue purchasing loans from local lenders.

True

The health of the overall economy may rely heavily on construction of new properties. True or False?

True

The secondary market may act as a balancing mechanism by making money available in hot local markets and providing a safe avenue for cold local markets to unload excess funds.

True

Adele put her house on the market a week ago, and today, the big real estate news is that interest rates will go down by half a percentage point. Adele's market will likely now have more potential buyers. True or False.

True Side note: At a basic level, lower interest rates mean that there will be more activity in the real estate market.

Political events

Any level

The three-business-day period following the latter of either the date that the transaction is consummated or the date the disclosure is made, during which a borrower can cancel their loan, is called the ______.

Right of rescission

Which of the following has a direct responsibility to pay the nation's bills?

U.S. Treasury

Which one of the following best describes the state of the market during the recession phase of the real estate cycle?

Unemployment increasing, prices falling, and foreclosures on the rise

Unit of account, medium of exchange, and what other factor define money?

Unit of account, medium of exchange, and what other factor define money?

Store of value, medium of exchange, and what other factor define money?

Unit of value

Which of the following best describes a seller's market?

Demand is greater than supply

Fed just announced that it's raising interest rates. Jonathan, a real estate professional is excited because more buyers can afford to borrow money. True or False.

False

Secondary mortgage market players purchase securities from investors, then package and resell them to local lenders.

False

Which of the following programs broke the normal 80/20 ratio rule usually required as a loan-to-value and offered favorable interest rates?

Home Affordable Refinance Program (HARP)

In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market?

Low interest rates and high property values

Which generation financed their homes due to also having other debt obligations?

Millennials

Iris is planning to purchase her first home. Based on what you know about the nature of real estate finance in our country, which approach is she most likely to use?

Obtaining a loan to purchase the home

As unemployment decreases, more and more buyers enter the market looking to purchase homes. The number of homes does not meet buyer demand, so new home construction increases to boost the supply. Multiple buyers may be after the same property, causing bidding wars, which drive up prices.

Over supply

In which phase of the real estate market would you expect to see properties selling for more than they're worth, many buyers in the market, and lots of new construction?

Over supply

Things in the real estate market are starting to improve. Foreclosures are still high, but not increasing. The same is true with unemployment. The public is still generally uneasy about the economy, but we've made it through the worst.

Recovery

Natalie is a licensee who assists buyers in the purchase of HUD ______ when they're listed for sale.

Repossessed homes

What does it mean if the Fed increases reserve requirements?

Member banks must keep more assets on deposit at the reserve bank.