CA Real Estate Finance Course (UNIT QUIZZES)

On an FHA 203(k) loan, the combined cost of home value and rehab must ______.

Fall within the FHA mortgage limit for the area where the property is located

What's the most common indicator of illegal property flipping?

Falsely inflated appraisal

Chad had some major medical expenses that he didn't plan for, and he wants to slash his budget in order to pay off the debt quickly. He considers selling his home and renting an apartment, which will make a big difference in his _________ expenses.

Fixed, essential

Which of the following is a risk most associated with wholesaling as a real estate investment strategy?

Inability to immediately resell the property for a profit

Which of the following may a lender request to verify an applicant's bank deposit information?

Account statement

What does the concept "first in time" refer to when discussing lien priority?

Liens are paid based on date of filing

Nicole is a young licensee just starting her business and doesn't have any income yet. She decides to purchase insurance as soon as she has the money. Which of the following can she likely skip for now?

Life

Laura is considering her personal financial goals. Which of these should be first on her list?

Living within her means

The lender, the employer, and the ______ all complete parts of the request for verification of employment form.

Loan applicant

What is it called when the borrower and lender work together to restructure the terms of a home loan?

Loan modification

Which of the following is an example of an inquiry initiated by a creditor (without the consumer's permission) that may appear on a credit report?

Pre-approved credit

The ______ clause allows the borrower to pre-pay principal on the loan at any time without penalty.

Pre-payment

If Jeff is healthy and always has excellent check-ups, which of the following would likely be the most important factor in his insurance selection?

Premiums

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

A property has just been foreclosed on. Which of the following describes the rules regarding lien priority?

Property tax liens take priority, with all others following a "first in time" rule.

Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?

Reduce lender risk by establishing borrower qualification standards

What is it called when borrowers pay back all of the amounts owed and become current (no longer in default) on their loan?

Reinstatement

A loan with borrow options that can be long term with periodic adjustments or short term with more frequent adjustments to the rate is a(n) ______ mortgage.

Renegotiable rate

A loan that will be used for personal, family, or household purposes and is secured by a mortgage, deed of trust, or equivalent instrument to residential real property is called a(n) ______.

Residential mortgage loan

______ is the term that the VA uses to describe the amount of net income remaining after deduction of debts, obligations, such as utility and phone bills, and monthly shelter expenses.

Residual income

The CFPB promotes consumer protection in the credit market through a number of strategies, including ______

Responding to and investigating consumer complaints regarding financial services

Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?

Reverse annuity mortgage (RAM)

Some countries have banks that issue loans for U.S. real estate purchases. What are the main countries that participate?

Taiwan, the U.K., and Canada

What does the "T" in PITI stand for?

Taxes

Margot is hoping to buy the Bransons' farm. However, lender Susan informs her that a cloud has been discovered on the Bransons' title. Who is usually responsible for clearing the cloud?

The Bransons

Which agency sets the guidelines for qualified mortgages?

The Consumer Financial Protection Bureau

Which statement best describes a reverse annuity mortgage?

The borrower receives payment from the lender through regular monthly advance payments.

What is a short sale?

The borrower sells the property, but for less than the amount owed on the property

Sara has finished completing her loan application. She has gathered the necessary documentation and will be informed whether the application will be approved. Who is Sara?

The buyer

Which of the following is a potential disadvantage for a buyer who enters into a lease with an option to buy contract?

The buyer/lessee could lose any funds credited to the purchase price if he breaches the lease's terms.

In a 1031 exchange, there are rules governed by Section 1031 of the Internal Revenue Code. The rules include _______.

The property in an exchange must be like-kind.

How are creditors or lien holders paid during a foreclosure process?

The property is sold at auction and lien holders are paid from the proceeds of the sale.

What is a statutory right of redemption?

The right of a borrower to redeem the property by paying amounts owed plus costs, even after the foreclosure sale

Jansen is a real estate licensee with a mortgage loan originator endorsement. He's representing the seller as their real estate agent, and the buyer as a mortgage loan originator in the same transaction, without the permission of either party. What is this an example of?

Undisclosed dual agency

The FHA Section 203(h) program assists ______ with an insured mortgage.

Victims of a presidentially declared disaster

Rich wants to add a room to his house, so he takes out a home equity loan. This creates a(n) ______ lien.

Voluntary and specific

A lapse in property insurance coverage can result in borrower default because it leaves the lender ______ should something happen to damage the property.

Vulnerable

When is a loan modification considered?

When a borrower has missed payments but still has some financial security

When is private mortgage insurance typically required on a conventional loan?

When the borrower's down payment is less than 20%.

Calvin purchased a house for $220,000, financing $200,000 using a 30-year conventional mortgage at 4% interest. His monthly payment is $955, including both principal and interest. The annual property taxes are $1,400 and the combined annual insurance premium is $900. What's Calvin's PITI payment each month?

$1,146.67

Which of these are essential elements of a personal financial responsibility?

An emergency fund and a retirement plan

Which of the following individuals would qualify to purchase a home under the Good Neighbor Program?

An emergency medical technician

What's the definition of appreciation?

An increase in property value

Which of these would most likely be found in the "accounts in good standing" section of a credit report?

An open car loan that has never been late

Which of the following is true about the Federal Housing Administration's qualifying standards for a mortgage loan?

Are somewhat less stringent than standards for conventional loans

A ______ is often used in commercial applications when two or more properties are pledged as security for repayment of the loan.

Blanket mortgage

What is meant by pass-through taxation?

Business income is taxed on the owner's personal return.

Which party pays for the appraisal in a financed real estate transaction?

Buyer

Who is responsible for paying the loan origination fee in a financed real estate transaction?

Buyer

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

During which phase of the real estate cycle does a real estate professional have the most direct impact?

Buying/selling

How does Farmer Mac support agricultural producers?

By creating a secondary market for agricultural loans, making it possible for agricultural lenders to fund more loans

How can a foreclosure process be temporarily stalled?

By filing for Chapter 7 bankruptcy

Limited buyer income, property location and price, and a home buying education course are all eligibility requirements for ______.

A CalHFA mortgage assistance program

Who needs to obtain a mortgage loan originator endorsement and register with the Nationwide Mortgage Licensing System and Registry?

Anyone who acts as a mortgage loan originator

The ______ Act was legislation aimed primarily at addressing the effects of the subprime mortgage crisis.

Housing and Economic Recovery

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

Recovery

Kendra has applied for a mortgage from Best Bank. When is Best Bank required to provide Kendra with a Loan Estimate?

Three business days

The purpose of the Seller Financing Disclosure Law is ______.

To ensure that all parties are educated about loan terms and about who will be compensated for arranging credit

One of HUD's goals reflects a response to financial issues experienced in the housing market during the 2007 economic crisis. The goal is ______ to bolster the economy and protect consumers.

To strengthen the housing market

The ______ requires specific disclosures and was enacted in 1968 as part of the Consumer Credit Protection Act.

Truth in Lending Act

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?

Closing costs aren't considered a seller concession.

Georgette and Elise are buying a home together, and have taken out a loan with a private loan company. They'll pay a bit more interest, and larger fees, but they feel it's worth it to have the home they've always dreamed of. What else might the private loan company require?

Collateral

Synergy National Bank issued a conventional loan that is eligible for purchase by Fannie Mae. When Fannie Mae purchases the loan, what will Synergy National Bank receive in return?

Collection fee

Althea is starting her own candle business. Her plan is to rent a space to sell her products for several years, with the hope of expanding. In this scenario, which item represents supply?

Commercial space for lease

Commercial banks fall into which of the following category of lenders?

Institutional lenders

Which of the following is classified as the least liquid on the scale?

Institutional money market funds

Ginnie Mae only guarantees mortgage-backed securities that contain loans ______.

Insured or guaranteed by U.S. government agencies

What's a key feature of the Federal Housing Administration's loan program?

Insures lenders against loss from borrower default

Mark and Nancy purchased a municipal bond to help with the funding of a new school gymnasium. In exchange for their investment, what will they receive?

Interest

In addition to itemizing all borrower-paid and seller-paid closing costs, page two of the Closing Disclosure also tells the borrower when each amount is paid by listing it under ______.

"At closing" or "before closing"

The _______ section contains the seller's existing mortgage loan payoff amount that must be paid to complete the transaction.

"Due from Seller at Closing"

Store of value, unit of account, and what other factor define money?

Medium of exchange

Which of the following would the FDIC most likely not insure?

Stock certificates

What does it mean when a life insurance company uses participation financing?

The life insurance company participates by taking partial ownership of the project in exchange for funding the loan.

What's the acronym for the legislation that established processes and procedures for how federal agencies propose and enforce regulations?

APA

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

Banks don't have access to additional funds.

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

Increase

The intent of the Consumer Credit Protection Act, which includes the Truth in Lending Act, is to safeguard the consumer by ______.

Requiring full disclosure of the terms and conditions in any offers of credit

What's the purpose of the Community Reinvestment Act?

It requires that lenders invest in development and rehabilitation efforts that enable low- and moderate-income individuals and families to afford a home.

What are the effects on a property if it includes an encumbrance?

It restricts the owner's use or decreases the value.

Which of the following statements is true about the annual MIP on an FHA mortgage?

It will decrease each year as the loan is paid down.

Which of the following best describes the California short sale addendum?

It's a form that accompanies an offer of purchase for a short sale.

This foreclosure process must be used when the security instrument doesn't contain a power of sale clause.

Judicial

Which method of foreclosure involves the court and a sheriff's sale?

Judicial

How much should you keep in your tax savings account in order to be prepared to pay your quarterly estimated tax?

Just over what you expect to owe

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

Kate is looking over the document that provides the approximate loan-related costs, along with the loan's terms. What is Kate reviewing?

Loan Estimate

Which of the following is designed to make consumer financial products and services fair and transparent?

Consumer Financial Protection Bureau

Because of the Mortgage Disclosure Improvement Act, the only advance fee that a creditor can charge to a consumer before providing required loan disclosures is a(n) ______ fee.

Credit report

Which of the following could be different from the amount on the initial Loan Estimate and can impact the monthly payment?

Interest rate

What does NCUA stand for?

National Credit Union Administration

Which of the following best describes the state of the market during the over-supply phase of the real estate cycle?

Properties are selling for more than their appraised value, many buyers are in the market, and there is lots of new construction.

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

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

Recession

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

Repossessed homes

What is the purpose of the Federal Reserve System?

The Fed regulates the U.S. depository institutions.

Which of the following statements is true about the Federal Reserve?

Twelve district banks comprise the Fed.

In what situation would the U.S. Treasury be most willing to sell securities?

When the government's bills exceed income collected

A Treasury note is a Treasury security ______.

With a maturity term between two and 10 years

A Treasury bond is a Treasury security ______.

With a maturity term of 30 years

Under which section of the Loan Estimate will you find any credits provided by the seller?

Calculated Cash to Close

Lewis is reviewing his Loan Estimate and notices under "Other Costs" that there are items listed that don't include an amount. What does this mean?

Lewis should ask his lender about it

Which of the following is part of the Other Disclosures section?

Liability After Foreclosure

Kendra is purchasing a home and is ready to find a lender who will give her terms that she can afford. What lender-issued document can she use to compare loans and find the one that will best meet her needs?

Loan Estimate

How do mortgage lenders acquire income?

Loan interest and mortgage packages sold on the secondary market

Which of the following statements is true about usury laws in California?

Loans secured by real property and arranged for by a real estate broker are exempt from state usury laws.

Which of the following is a true statement about FHLBanks?

Member banks can borrow for up to one year without collateral.

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

Taxpayer Relief Act of 1997

Cassie is helping her buyer client, Gus, prepare for closing. What should she encourage him to verify as soon as he receives the form?

That the borrower and seller names, the property address, and the sales price are accurate and spelled correctly

What agency receives paper currency prior to its distribution but after it's printed?

The Federal Reserve

Maria is a borrower reviewing her Closing Disclosure. She notices that the appraisal fee is listed under "Paid by Others" and has an L listed with the amount. What does this mean?

The L indicates that the creditor pays the item at consummation.

Which of the following may cause the Loan Estimate to be revised?

The buyer decides to get a different kind of loan.

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

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

The Farm Credit System funds are acquired from ______.

The sale of debt securities and international money markets

The loan amount plus the down payment should equal ______.

The sales price of the home

The Housing and Economic Recovery Act and the American Recovery and Reinvestment Act were enacted in response to ______.

The subprime mortgage crisis and economic meltdown of 2007-2008

Which statement most accurately describes the right of rescission?

The three-business-day period from the date a transaction is consummated or disclosures are delivered to the borrower, whichever is later, during which the borrower can cancel the loan

Which government program assists rural Americans by offering loans, grants, and loan guarantees for housing?

USDA Rural Development

Robert is a rancher. He was told about the USDA Farm Service Agency offerings. What can he use an approved loan for?

Building a new hay barn

Farmer Mac is supervised by which entity?

Farm Credit Services Administration

Lenny the lender is reviewing mortgage applications. Applicant Catherine has a good credit history, but the property she wants to buy is in an area of town where home prices have been headed down, and neighborhoods are starting to look grim. Lenny denies Catherine's loan application. What California legislation makes Lenny's decision illegal?

Housing Financial Discrimination Act (Holden Act)

Under the "Projected Payments" section of the Loan Estimate, the consumer can view what is included in the monthly payment. Which of the following may be part of the total payment other than the principal and interest?

Mortgage Insurance

Which is one of the benefits of the USDA loan program?

No down payment is required.

The Dodd-Frank Act created the CFPB in part to regulate ______, which were among the largest originators of subprime mortgages prior to the financial crisis of 20072008.

Non-bank lenders

What term is used to describe the housing inventory in default or foreclosure?

Shadow Inventory

The _______ requires lenders to disclose financing terms to consumers in a manner that's not misleading or deceitful.

Truth in Lending Act

The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation.

USDA Farm Service Agency

Which of the following best describes collateral?

Using a house as security on a mortgage

Remy's mortgage payment is $1,256.28. His annual property taxes are $809, and his annual insurance premium is $712. How much of his payment goes toward the principal and interest?

$1,129.53

Your seller wants to net $100,000 after the 5% commission is paid. Assuming no closing costs, at what price does the home need to sell for the seller to net this amount?

$105,263.16

The gross income multiplier for an area is 12x. If the estimated annual rent is $10,000, what's the property's estimated value?

$120,000

Your client, Ray, wants to purchase a home listed for $200,000. The home is in a revitalization area, and Ray can purchase it under the Good Neighbor Program. How much will he have to pay for the home?

$200,000, less 50%, plus $100

Cheryl bought her home three years ago for $217,000. Assuming her home appreciated at the 3% rate typical of her current market, how much is her home worth now?

$237,121.76

David is buying a home for $400,000 and financing 90% of it. If his lender charges a 1% loan origination fee, how much will the lender charge to originate the loan?

$3,600

An annual insurance premium is $500. What's the monthly insurance payment?

$41.67

A buyer is purchasing a property for $500,000. His lender's loan-to-value ratio is 90%. How much is the buyer financing?

$450,000

A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What's the amount of the loan origination fee if the lender charges one-and-a-half points?

$6,750

Your client, Judy, with a credit score of 620, has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will apply?

$7,000

Generally, what's the common range for loan origination fees?

1% to 3%

A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is estimated at $6,000. What's the gross rent multiplier?

100x

Which section of the Internal Revenue Code allows the owner of real property to sell that property, then reinvest the proceeds in a "like-kind" property and defer paying any capital gains taxes?

1031

In a judicial foreclosure, if a deficiency judgment won't be sought, how soon after the Notice of Levy is recorded can the Notice of Sale be issued?

120 days

Which of the following percentages is an allowable loan origination fee?

2%

Over how many years is a residential income-producing property depreciated?

27.5 years

The minimum down payment for an FHA 203(b) loan is ______.

3.5%

Approximately how many states have predatory lending laws?

36

Over how many years is a commercial property depreciated?

39 years

Which range of credit scores represents the average score for Americans overall?

670 to 739

Consumers in the _______ range have an above-average credit score. They tend to qualify for better interest rates than those in the "acceptable" category.

740-799

What's the most common ratio for borrowers who use split, or piggyback, mortgages?

80/10/10

Which of the following describes total debt ratio?

A calculation that looks at all recurring (or installment) debt, such as monthly mortgage, car, credit, and loan payments, as a percentage of the borrower's monthly gross income

How does the FHA control the use of 203(k) money loaned for repairs to a home?

A cost estimate must be provided prior to loan approval, and repairs are approved by an FHA inspector when completed.

By stabilizing and improving the mortgage market, the FHA helped to build ______

A global market for mortgage-backed securities

Robin has great credit and was able to secure a loan for her ocean-side dream home. Her 30-year, fixed-rate loan is for an amount that's above conventional loan limits. What type of loan does Robin have?

A non-conforming loan

What is a government-sponsored enterprise?

A private company the U.S. Congress created to make certain borrowing easier and cheaper

Which of these individuals will have a unique identification number in the Nationwide Mortgage Licensing System and Registry?

A real estate licensee with an MLO endorsement

Which of the following is a requirement if you set up a corporation in order to perform real estate services?

A separate bank account in the corporation's name

What type of property is Aileen appraising if she's using the income approach?

A short-term lake rental

What type of property is Valerie appraising if she's using the sales comparison approach?

A single-family residence built six years ago

Which of the following types of properties may be eligible for purchase by Freddie Mac?

A triplex purchased as a primary residence

What is a seller carry back?

A type of financing

What time of year is recommended for performing an annual review of your personal financial plan?

After filing annual income tax

The ______ clause is also known as a due-on-sale clause.

Alienation

Which of the following best describes a recourse mortgage?

Allows the lender to sue the borrower for damages if foreclosure occurs

For which of these properties would gross income multiplier be calculated?

An apartment building with 50 units

Which of the following is NOT required to transfer ownership of a note?

Assignment of the note to the new owner

What information does Schedule A of an ALTA title commitment provide?

Basic facts related to the transaction and property, including a legal description

Which of these is a reason that the deed of trust is the standard security instrument used in California real estate transactions?

Because California foreclosure laws allow a statutory right of redemption of up to one year with a judicial foreclosure.

Everyone can benefit from following a personal financial plan. Why is this especially important for the independent contractor?

Because income is not as reliable as it is for a regular employee

Which agency is responsible for the production of paper currency?

Bureau of Engraving and Printing

When borrowers started missing mortgage payments, how did this affect collateralized mortgage obligations?

CMOs weren't collecting the expected principal and interest payments

The ______ is provided by a VA-assigned appraiser.

CRV

Conrad has purchased a home in California and, as a veteran, he's been able to take advantage of the CalVet home loan program. How does this loan program work?

CalVet holds the legal title to the property until the loan is paid off.

Jan is a real estate licensee with a mortgage loan originator (MLO) endorsement. When she acts as an MLO, what law limits the amount of commission and fees she can earn for negotiating a loan on behalf of her client?

California Real Property Loan Law

A mortgage banker licensed under the ______ may make, sell, and service residential mortgage loans.

California Residential Mortgage Lending Act

Lucy is a mortgage banker. Her business is regulated by ______.

California Residential Mortgage Lending Act

Mutual savings banks have limitations on their lending activities, as specified in their ______.

Charter

A vendor and vendee are the parties involved when the finance instrument is a ______.

Contract for deed

Secured corporate bonds use ______ as collateral.

Corporate assets

Memoryjet, Inc has developed a new technology for high-volume jump drives. In order to manufacture their new devices they will need to gear up a new production line, which will cost about $85 million. What kind of bond instrument could they use to help secure the funds they need for their new line?

Corporate bond

Interest-only loans are a form of ______ buyer financing.

Creative

To qualify for a mortgage loan originator endorsement, applicants must meet education, examination, fingerprint, and ______ requirements.

Credit report

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

Decrease

A lender is preparing to begin foreclosure proceedings. Rather than go through this proceeding, the borrower decided to turn over the deed to the property. What is this called?

Deed in lieu of foreclosure

With a VA loan, the certificate of reasonable value is used to ______.

Determine the value of the loan that the VA will guarantee

What's the acronym for the legislation that prohibits lenders from denying credit to applicants on the basis of their protected class status?

ECOA

To qualify for a mortgage loan originator endorsement, applicants must meet examination, fingerprint, credit report, and ______ requirements.

Education

How many hours of continuing education must real estate licensees complete each year to renew their MLO endorsement?

Eight hours

Jackson holds a real estate broker license with an MLO endorsement. How many hours of continuing education must he complete each year to renew this endorsement?

Eight hours

The secondary mortgage market buys loans from the primary market. How does this aid the lending market?

Ensure funds are available to borrowers

Dan is being sued by a former client who feels that Dan didn't provide him with adequate service. Which of the following insurance coverage will Dan need?

Errors and omissions

Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have?

FHA

When borrowers miss scheduled mortgage payments, allow their property to go into disrepair, or ______, they could face loan default.

Fail to pay property taxes

Of the institutions listed, which of these is viewed only as a secondary mortgage market player?

Fannie Mae

Which of the following is an example of a government-sponsored enterprise (GSE)?

Fannie Mae

Which secondary market player would be interested in purchasing a loan from a commercial bank?

Fannie Mae

Credit flows to rural communities largely through the actions of ______.

Farmer Mac

If you were a farmer who obtained a loan for your business, it's most likely that your lender will sell your loan to which of the following entities?

Farmer Mac

______ creates a secondary market for agricultural loans by buying the loans, pooling them, and selling them as securities.

Farmer Mac

______ works with lenders to make long-term credit available to homeowners and businesses in agricultural and rural communities, including farmers and ranchers.

Farmer Mac

The rate at which a bank can obtain an overnight loan from another bank without providing collateral is called the ______ rate.

Federal Funds

When establishing guidelines for conforming loans, Fannie Mae and Freddie Mac use loan limits set by which entity?

Federal Home Financing Agency

______ is regulated by the Federal Housing Finance Agency.

Freddie Mac

The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time.

Funding fee

Stephanie was having trouble making her mortgage payments. Now her payments are lower than they were, and she's able to pay them each month. This is because her lender ______.

Gave her a loan modification

Which institution guarantees mortgage-backed securities with the full faith and credit of the United States?

Ginnie Mae

The interest rate on an FHA Section 251 adjustable rate mortgage will ______.

Go up or down, but can't change more than a maximum number of points allowed by the FHA over the life of the loan

What's the acronym for the legislation that requires financial institutions to document and publicly disclose lending practices?

HMDA

When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients?

Have an attorney review the contract.

The three general groups of international buyers that real estate professionals may encounter are those who ______, those who are looking for a vacation home for when they travel to the U.S., and those who are looking for a luxury property as an investment.

Have work visas and are looking for a home to purchase while they're in the U.S.

Rick is required to file quarterly estimated taxes. Why might this be?

He's self-employed.

From a lender's perspective, what does a credit score on the low end indicate?

Higher risk

Dennis is a new licensee who's estimating his annual gross income for his first year. He plans to close at least five transactions that year, and he's researched average home prices in the area where he'll be working. Dennis finds that the average sale price is $280,000. What other data point does he need to complete his estimate?

His expected commission rate, minus his broker's split

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)

Which of the following specifies a requirement of pre-loan counseling for consumers?

Homeowner and Equity Protection Act

What's another term for front-end ratio?

Housing

Which of the following can help your very low-income clients either purchase or rent housing in the private market?

Housing choice vouchers

What is the purpose of a lifting clause?

It allows a borrower to refinance a first mortgage without affecting its lien position even when a junior mortgage is in place.

In California, how has state law modified the way the deed of trust works?

It creates a lien on the property, and the borrower, not the trustee, holds legal title.

Lucas would like to be a homeowner, but his low credit score makes lenders unwilling to give him a mortgage. What makes the 203(b) loan a more likely option for Lucas to qualify for a mortgage?

It has less stringent qualifying requirements than a conventional loan.

Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?

It increases demonstrated income.

What's the purpose of the Equal Credit Opportunity Act?

It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status.

What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?

Late charge

What's the name of the clause in a promissory note where this language appears: "If the Note Holder has not received the full amount of any monthly payment by the end of ______ calendar days after the date it is due, I will pay a late charge to the Note Holder"?

Late charge provision

In which situation will sellers apply a portion of the rent toward the purchase price to entice the buyers to close more quickly?

Lease with option to buy

The loan applicant, the employer, and the ______ all complete parts of the request for verification of employment form.

Lender

A seller is offering a second loan to help the buyer with her down payment via a contract for deed. Why might the buyer's lender have an issue with this?

Lenders don't like a contract for deed arrangements.

Denzel's loan payments have been reduced because his lender agreed to extend the amortization schedule stated on his note. This is the result of a ______.

Loan modification agreement

A calculation that describes the amount being borrowed compared to the value of a property is called ______ ratio.

Loan-to-value

Marty is an independent contractor. Who or what entity contributes the employer portion of his Medicare and Social Security payments?

Marty

When borrowers fail to pay property taxes, allow their property to go into disrepair, or ______, they could face loan default.

Miss scheduled mortgage payments

Julia is trying to buy a house and is going through the loan application process. As part of the process, her credit score was run. Which of these issues would harm her score?

Missed payments

Which type of real estate investment trust involves both residential and commercial properties?

Mortgage REIT

Who originates their own loans?

Mortgage bankers

Life insurance companies participate in real estate in the ______ arena.

Mortgage blocks from secondary mortgage market

Which person or entity works with many different lenders to find the best loan for the customer?

Mortgage broker

Any person acting as a mortgage loan originator must register with the ______.

Nationwide Mortgage Licensing System and Registry

Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs

Native Americans living on tribal land

Carl is trying to trim his expenses, so he first looks at cutting some of his _________ costs in his budget.

Non-essential

A mortgage with a clause that prohibits the lender from suing the borrower for unpaid amounts if foreclosure occurs is called a ______ mortgage.

Non-recourse

Siobhan has a mortgage with a clause that prohibits her lender from suing her for unpaid amounts if foreclosure occurs. This is called a ______ mortgage.

Non-recourse

To qualify for the FHA Streamline Refinance program, a homeowner must ______.

Not be delinquent on mortgage payments

Recording of this item officially begins the non-judicial foreclosure process.

Notice of Default

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

Office of Fair Housing and Equal Opportunity

Which of the following may a lender request to verify an applicant's work history and earning information?

Pay stub

Which of the following is the best investment for a licensee?

Paying down outstanding credit card debt

Wendy has been approved for her first mortgage. The lender advertised a 4.6% interest rate. She's nervous about the terms and fees. What information is the lender required to provide?

Payment schedule, APR, finance charges, pre-payment penalties, late penalties, and total financed amount

Which of these actions is an MLO violation?

Performing MLO activities before obtaining an endorsement

Which of these is an optional ongoing expense for a licensee?

Personal website

Jody is concerned about the ______ encumbrance that doesn't allow her to start her gardening greenhouse because it sits next to a nature conservancy.

Physical

A judicial foreclosure process is used when the security instrument does not contain which clause?

Power of sale

The ______ clause in a deed of trust allows the lender to foreclose non-judicially.

Power of sale.

A borrower sued a foreclosure consultant for violating the Mortgage Foreclosure Consultant Law. The borrower may receive actual damages, legal fees, and, in severe cases ______.

Punitive damages up to three times the borrower's actual damages

Which of the following actions is completed by the secondary mortgage market?

Purchases loans from lending institutions

Ally is reviewing the personal information on her credit report. What information is NOT included in the personal information section?

Race and ethnicity

When an investment property is sold, three taxes that apply are transfer tax, capital gains and ______.

Recaptured depreciation

FHA-insured loan programs cover all of the following EXCEPT ______.

Recreational vehicles

When interest rates increase, what is the impact on mortgage-backed security investors?

Returns on investments increase

Section 255 of the Title II FHA-insured loan program covers ______ mortgages for borrowers age 62 or older.

Reverse

A RAM is a type of equity financing. What does RAM stand for?

Reverse annuity mortgage

Margaret isn't ready to buy Jill's property, but she pays Jill a fee that guarantees she'll be notified if another buyer appears. If another buyer does make an offer, Margaret has the opportunity to purchase at the price and terms of the offer. Margaret has a(n) ______ on Jill's property.

Right of first refusal

What did the Troubled Asset Relief Program allow the U.S. Treasury to do in response to the 2007 financial crisis?

Spend billions

The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.

Streamline Refinance

When HUD pursues actions that are designed to restore the financial health of the Federal Housing Administration, which of its goals is it supporting?

Strengthen the housing market to bolster the economy and protect consumers.

Which clause refers to the order of liens on a property?

Subordination

Borrowers who fall into the ______ category may be faced with paying interest 1% to 5% over the current market rate.

Subprime

What is one of the ways the U.S. Treasury promotes economic growth and stability?

Supervises national banks and financial institutions.

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

Supply is greater than demand

A like-kind exchange, or 1031 exchange, is also referred to as a ______.

Tax-deferred exchange

Bart is selling his home and has accepted an offer from a buyer, who's obtaining a VA loan. The sale price is agreed upon and is in the purchase contract. Then Bart receives a call from his agent, explaining that the buyer is hoping that Bart will lower the sale price because ______, and there is a risk the buyer will not be able to get the VA loan as a result.

The VA appraiser completed the CRV and it is less than the sale price

The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.

The borrower

Which parties must be identified on the promissory note?

The borrower and the lender

Which of the following features is shared by the mortgage and the deed of trust?

The borrower is required to maintain the property and pay property taxes and insurance.

Appraiser Victor is determining the insured value of a property. What is he evaluating?

The cost to replace or rebuild a property

The annual MIP is recalculated each year using ______.

The end-of-year loan balance, plus the balance after the next 11 payments

The percentage recommended for a licensee to allocate when building an emergency fund is ______.

The largest percentage possible after paying all essential expenses

Ronald is having his existing loan modified. During the application process, why will Ronald's lender perform a title search on his property?

The lender wants to ensure that an existing lien won't take priority over the modified loan

Which of the following activities must occur before a trustee can begin a non-judicial foreclosure?

The mortgage service must notify the borrower of their delinquency and foreclosure alternatives

Which of the following is true regarding value?

The principle of substitution means that people won't pay more for a property than they have to if there are two similar properties.

Which of the following is a true statement about when a promissory note is sold?

The promissory note is endorsed to the new owner of the loan.

Anna is selling her home and met a nice young couple she really wanted to sell to, but they couldn't get financing. If Anna agrees to carry part of the loan for the buyers, what does she need to understand?

The risks involved

When the Torrens system is used to perform a title search, who or what entity acts as title guarantor in case a claim is filed?

The state

If there is some kind of defect on a property's title, what effect does this level of transferability have on the property's value?

The value falls

In a judicial foreclosure, how long does the borrower's redemption period last if a deficiency judgment isn't being sought?

There is no redemption period

Dennis wanted to leave his surfboard to his niece when he died, but he didn't want her to miss a single minute of wave action while his estate was held up in probate. Dennis needs ______.

To create a living trust

What's one reason a homeowner would want to refinance their mortgage?

To get a lower interest rate

What is the purpose of the California Foreclosure Reduction Act?

To regulate lenders so that borrowers have a better chance to avoid foreclosure

What does TILA stand for?

Truth in Lending Act

Which of the following provides the lender with an accurate opinion of a property's market value?

Uniform Residential Appraisal Report

What is one disadvantage of a will over a trust?

Wills are made public; trusts are not.

What's the most common way that a seller can help a buyer come up with the funds to complete a real estate transaction?

With a contract for deed

Is a homeowner with an FHA loan allowed to obtain a second mortgage?

Yes, if the total of the first and second mortgages is within the maximum loan to value ratio

In which of the following situations is a catastrophic health insurance plan the most reasonable choice?

You have excellent health and get regular check-ups

In a deed of trust, who is the trustee?

a neutral third party

Robbie's lender notified him of an impending foreclosure, and told Robbie that his property will be sold at public auction. After the auction occurred, he receives a notice of eviction for which the lender had to petition a court. What does this describe?

Foreclosure by advertisement

Which of these transactions must comply with Appraiser Independence Requirements?

Four-unit residence being purchased with a conventional loan

Which of these agencies is a government-sponsored enterprise?

Freddie Mac

Sherman is required to file quarterly estimated taxes. Why might this be?

He's self-employed.

Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?

Her rate will be 3% for the first year, 4% the second year, and 5% after that.

Andy is selling his home to Erika and Doug, who are using an FHA loan for the purchase. To facilitate the purchase, Andy can agree to pay ______.

Discount points to buy down Erika and Doug's interest rate

Why did investors purchase CMOs prior to the 2007 financial crisis?

Housing price appreciation appeared to be a sure thing.

Which type of real estate investment trust derives its income from the rent or sale of property and interest dividends?

Hybrid REIT

Morris still owes his lender for the financing obtained in purchasing his home. Several years later, Morris took out a home equity line of credit. This means that ______.

If Morris is foreclosed on, the home equity line of credit won't be paid until Morris's first loan is paid off

Where does a veteran have to live to qualify for the Native American Direct Loan?

On federal trust land

Who must provide the buyer and seller with a copy of the closing disclosure?

The buyer's lender

What's one reason a borrower may choose a piggyback (or split) loan?

To avoid paying private mortgage insurance

Biff is completing a residential loan application. Which of the following would he include in the liabilities section?

Car loan

Which of these items is a liability on a residential loan application?

Child support

The ______ was a response to the practice of redlining and was enacted in 1977.

Community Reinvestment Act

The neighbors in South Mountain Village got tired of all the drug dealing and criminal activity surrounding a shop, the Mystery Market. The community boycotted the store, which eventually closed, and with the help of local financial institutions, a social services center was added to the area. What act is this an example of?

Community Reinvestment Act

Which entity sets the requirements for qualified mortgages?

Consumer Financial Protection Bureau

To qualify for a mortgage loan originator endorsement, applicants must meet education, examination, credit report, and ______ requirements.

Fingerprint

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?

Her down payment of $50,000 isn't at least 20% of the purchase price.

What is the general economic impact of mortgage loan payments?

Increase in economic growth

What could be a consequence if there were no secondary mortgage market?

Lenders might not have funds available to make new loans to the public.

Which professionals are most utilized by the buyer prior to closing?

Lenders, title companies, appraisers, and home inspectors

HUD's ______ has a goal of increasing the availability of safe and affordable housing to Native American families.

Office of Native American Programs

On the Loan Estimate under "Loan Costs," the points, application fee, and underwriting fee are considered ______.

Origination charges

In which type of partnership is there is more than one mortgagor as owner?

Partnership among mortgagors

Jasmine wants to buy a duplex where the mortgage is $300,000. Her income only qualifies her for a $200,000 loan, and she doesn't have enough saved to make up the difference. What factor might allow her to obtain financing anyway?

Rental income

If a cloud on a title is discovered, which party is generally responsible for clearing the cloud?

Seller

There are fewer properties available in the market than there are interested buyers. What type of market does this describe?

Seller's Market

Buyers Romy and Steven are looking over closing documents and don't know if the Loan Estimate matches everything on the Closing Disclosure. Usually, amounts shown on the Closing Disclosure that don't exactly match the figures on the Loan Estimate will be due to _______.

Updates to reflect the terms of the borrower's legal obligation when the loan closes

The Mortgage Disclosure Improvement Act gives applicants a three-day ______ to review and approve the Loan Estimate and Closing Disclosure form.

Waiting period

What's the term for a group of loans packaged together and then sold to investors on the secondary market?

Mortgage-backed security

Private loan companies may be found in many places. There are ______, regional, and local lenders, and even individual entrepreneurs who loan money.

National

Contributions for this type of IRA aren't tax-deferred.

Roth

Which appraisal approach will likely weigh most heavily during the reconciliation step when appraising a single-family residence?

Sales comparison

When completing a loan application, the applicant must list their assets. Which of these is considered an asset?

Savings account

Sally, Larry's appraiser, has provided her with a title commitment and indicated there's a problem with the title. Where can Larry find the requirements that must be met before a title insurance policy will be issued?

Schedule B-1

Where can a party that's reviewing a title commitment find exceptions that aren't covered by the title insurance policy?

Schedule B-2

Which of these is a required component of a successful system for your personal finances?

Schedule regular time with your finances.

The Addams family has an FHA-insured loan. The family's mortgage payment has a fixed interest rate, but after the first five years, the rate will adjust annually. Which FHA loan insurance program are they using?

Section 251

What is the name of the federal act that sets requirements for mortgage loan originators (MLOs)?

Secure and Fair Enforcement for Mortgage Licensing Act

The mortgage and the deed of trust are ______ that pledge property as collateral for a loan.

Security instruments

The ______ table discloses the amounts associated with the transaction that the seller will pay and receive, usually resulting in a total cash to seller.

Seller's Transaction

Which of the following is a potential concern of a buyer who's entering into a contract for deed with a seller?

The buyer could lose the property after missing only one mortgage payment.

How does the VA fund the mortgage guarantee program so that lenders can be reimbursed for any losses from borrower default?

Through a funding fee charged to most borrowers

How is title usually conveyed to the buyer during a foreclosure process?

Through a referee's deed

Which of the following will be issued only if title is acceptable and an attorney provides a certificate of title opinion?

Title insurance policy

With which type of mortgage does the interest rate vary according to a specified index?

Adjustable rate

Which entity regulates government-sponsored enterprises?

Federal Housing Finance Agency

How is a mortgage banker paid?

Fees from originating and servicing loans

After purchasing a property, what can Jeremiah do to clear a possible future claim on the property's title?

File a suit to quiet title.

MLO applicants give permission for a credit report to be pulled so the NMLS can evaluate whether the applicant demonstrates ______.

Financial responsibility