Final Exam

Participation Certificates (PCs) are instruments used by a. GNMA. b. FNMA. c. FHLMC. d. Farmer Mac.

c. FHLMC.

If a lease must be acknowledged for recording, whose signature should be acknowledged? a. Property manager b. Lessor c. Lessee d. Notary public

. Lessor

A residential lot purchased 3 years ago for $10,000 has doubled in value. The house on the lot cost $40,000 and it increased $20,000 in value. If the house and lot are sold at market value today, how much profit will be realized? a. $30,000 b. $40,000 c. 33 1/3% d. 100%

a. $30,000

From whom would a borrower obtain a VA or FHA loan? a. Approved mortgage lender b. VA or FHA c. Insurance companies d. Sale of bonds

a. Approved mortgage lender

Which appraisal method would be most useful in appraising an unusual building which has a very limited and specific use? a. Cost approach b. Net income c. Capitalization d. Market comparison

a. Cost approach

A quasi-governmental agency, which was originally established to create a secondary mortgage market for FHA loans, is a. FNMA. b. GNMA. c. FHLMC. d. HUD.

a. FNMA.

The entity that purchases the most loans in the secondary market is a. FNMA. b. FHLMC. c. HUD. d. GNMA.

a. FNMA.

When the appraiser has decided to use the market approach, which of the following conditions would disqualify a sale as a fair market value transaction? a. Low down payment followed by below-average interest rates on the balance due b. Seller who was not in a hurry to sell c. VA sale d. Neighbor's house sold for a higher amount

a. Low down payment followed by below-average interest rates on the balance due

For a successful wraparound, it is necessary to have an existing mortgage with a. a below-market interest rate. b. a due-on-sale clause. c. an above market interest rate. d. an alienation clause.

a. a below-market interest rate.

A lease under which the amount of rent is based upon the tenant's sales volume is known as a. a percentage lease. b. a gratuity lease. c. an escalation lease. d. usury.

a. a percentage lease.

A company wishing to raise capital by selling its real estate but still remaining as the occupant of the property would enter into a. a sale and lease-back. b. an option agreement. c. an equity mortgage. d. a contract for deed

a. a sale and lease-back.

Equity sharing is based on the concept of someone who has assets sharing those assets in exchange for a. a share of the ownership. b. tax benefits. c. both a and b. d. neither a nor b.

a. a share of the ownership.

A contract that contains predetermined rent increases to take effect during the life of the lease is a. a step-up lease. b. one with a participation clause. c. a percentage lease. d. a net lease.

a. a step-up lease.

The interest rate of a loan from a local savings and loan may be increased or decreased during the life of the loan. This is an example of a. a variable interest rate. b. escalated interest. c. graduated interest. d. percentage interest.

a. a variable interest rate.

When two or more properties serve as collateral for the same loan, it is called a a. blanket mortgage. b. tandem mortgage. c. security mortgage. d. blended rate mortgage.

a. blanket mortgage.

In making an appraisal by the market comparison approach, an appraiser should a. consider the physical and economic features of the subject property. b. consider the yield of the subject's property with competitive rates of return. c. make adjustments to the value of the subject property with competitive rates of return. d. utilize comparable listings withdrawn from the market.

a. consider the physical and economic features of the subject property.

One of the primary reasons for the decline in loan demand at savings and loan institutions appears to be a. deregulation of the lending industry. b. the poor location of many of the branch offices. c. the high interest rates being charged by commercial banks. d. poor supervision by regulating agencies.

a. deregulation of the lending industry.

A lease takes on value when a. economic rent exceeds contract rent. b. contract rent exceeds economic rent. c. contract rent equals economic rent. d. contract rent is less than economic rent.

a. economic rent exceeds contract rent.

A lease which requires a fixed constant amount of rent for each payment period of the term is called a a. gross lease. b. net lease. c. percentage lease. d. raw lease.

a. gross lease.

A tenant will know in advance how much his rent will be at any time during the lease under a a. gross lease. b. percentage lease. c. pass through lease. d. participation.

a. gross lease.

Commercial banks are most likely to deal heavily in a. interim loans. b. 40-year residential loans. c. home improvement loans. d. VA loans.

a. interim loans.

In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer a. lower initial interest rates. b. gifts such as appliances, trips, etc. c. lower insurance rates. d. lower down payments.

a. lower initial interest rates.

The most commonly used methods of real estate appraisal are a. market approach, income, and cost. b. income, reproduction, and cost. c. residual, cost, and market data. d. comparison, income, and capitalization.

a. market approach, income, and cost.

Under the terms of a normal net lease, the lessee is responsible for all of the following EXCEPT a. mortgage payments. b. repairs. c. water bills. d. taxes.

a. mortgage payments.

The definition of fair market value requires, among other things, that the a. property is exposed to the open market for a reasonable time. b. seller can convey a fee simple title. c. buyer is qualified for reasonable financing. d. sale was free of high-pressure listing and sales agents.

a. property is exposed to the open market for a reasonable time.

In any valid lease, the lessor by law gives an implied covenant of a. quiet enjoyment. b. satisfaction. c. reconveyance. d. undue duress.

a. quiet enjoyment.

The amount of money required to duplicate a property as of a certain date is called a. reproduction cost. b. depreciation cost. c. duplication approach. d. capital improvement.

a. reproduction cost.

The basic role of the GNMA is to a. resupply capital to primary lenders by guaranteeing repayment of pools of mortgage loans. b. insure loans made by primary government lenders. c. sell mortgage pools to money market funds. d. facilitate the resale of mortgage loans by marketing participation certificates.

a. resupply capital to primary lenders by guaranteeing repayment of pools of mortgage loans.

FHLMC was formed primarily to provide a secondary market for a. savings and loans. b. commercial banks. c. mortgage companies. d. insurance companies.

a. savings and loans.

A mortgage taken by a seller from the buyer in part payment of the purchase price of real estate is known as a. seller financing. b. a conflict of interest. c. usury. d. a second trust deed

a. seller financing.

When a valid, enforceable lease is terminated before expiration by means of a mutual agreement, but no penalties are required between the lessor and the lessee, the situation would be referred to as a. surrender. b. rescission. c. release. d. satisfaction.

a. surrender.

Lonnie and Connie had a one-year lease that ended November 30. They were still living in the apartment as of December 12 without a new lease and without the landlord's permission. They have become a. tenants at sufferance. b. tenants in common. c. tenants at will. d. tenants for years

a. tenants at sufferance.

The term "usury" in the field of real estate lending means charging an interest rate over and above a. the legal limit. b. the prime rate. c. 10%. d. 20%.

a. the legal limit.

One of the main differences between a land sales contract and a purchase money mortgage is a. the passing of title. b. interest charged. c. time between payments. d. the term of the loan.

a. the passing of title.

A rental contract gives the tenant a. the right of possession. b. temporary ownership. c. a freehold estate. d. the right to encumber.

a. the right of possession.

When considering a ARM loan, the lender must explain to the borrower, in writing, the a. worst-case scenario. b. best-case scenario. c. average-case scenario. d. respective credit report

a. worst-case scenario.

A 100-unit apartment building would typically require how many full-time management personnel? a. 1 b. 2 c. 4 d. 6

b. 2

When should a purchase money mortgage properly be recorded? a. Before the deed b. After the deed c. At the same moment as the deed d. Upon full payment

b. After the deed

All of the following offer secondary mortgage market programs EXCEPT a. FNMA. b. FDIC. c. FHLMC. d. GNMA.

b. FDIC.

Who holds a less than freehold estate under a valid lease? a. Lessor b. Lessee c. Landlord d. Owner

b. Lessee

A loan arrangement whereby a lender extends a line of credit is a. a buy-down mortgage. b. an open-end mortgage. c. a wraparound mortgage. d. a purchase money mortgage.

b. an open-end mortgage.

When an existing loan at a low interest rate is refinanced by a new loan at an interest rate between the current market rate and the rate of the old loan, the result is a a. combined rate. b. blended loan. c. wraparound loan. d. merged loan.

b. blended loan.

If an appraiser felt some comparable sales were better indicators of value than other comparables, he would assign more weight to them in the a. adjusted sales price. b. correlation process. c. 4-3-2-1- rule. d. replacement cost approach.

b. correlation process.

In valuing a fire station, an appraiser would most likely emphasize the a. market approach. b. cost approach. c. income approach. d. capitalization approach.

b. cost approach.

A residential apartment tenant would be expected to pay the landlord for a. normal wear and tear. b. damage to the apartment caused by the tenant. c. any change in the apartment. d. sun-faded carpet.

b. damage to the apartment caused by the tenant.

A tenant who operates a coffee shop rented a property under a lease which stated there would be no alcohol served. The tenant subsequently began serving liquor. The landlord would most likely seek a. artistic license. b. eviction. c. condemnation. d. injunctive relief.

b. eviction.

In a graduated payment mortgage, the graduated part is the a. interest rate. b. monthly payment. c. maturity date. d. entire loan is graduated.

b. monthly payment.

Upon termination of a rental contract, a. ownership reverts to the lessor. b. possession is returned to the lessor. c. possession is returned to the lessee. d. ownership reverts to the lessee.

b. possession is returned to the lessor.

If a lease on a commercial building contains an escalation clause, the a. tenant must maintain the elevators. b. rent could change. c. rent must go up and down regularly. d. rent stays the same but the term may change

b. rent could change.

Current legal thinking with regard to owner's obligations under a residential rental contract is that a. if a service is not promised in writing, it will not be forthcoming. b. the owner is obligated to keep the premises repaired. c. the owner has an obligation only to collect the rent and pay the utilities. d. only expressed agreements may be pursued in court.

b. the owner is obligated to keep the premises repaired.

Each of the following statements about open-end mortgage clauses is true EXCEPT a. using an open-end clause, the new amount borrowed is added to the mortgage balance. b. they are used in government loans like DVA and FHA. c. they are used in conventional mortgages. d. funds borrowed using an open-end clause are reamortized over the remaining like of the mortgage.

b. they are used in government loans like DVA and FHA.

A contract for deed on residential property a. allows transfer of title to the purchaser at the inception of the mortgage. b. transfers title to the purchasers at the fulfillment of the conditions of the mortgage. c. does not provide for transfer of title. d. requires the owner to occupy the property.

b. transfers title to the purchasers at the fulfillment of the conditions of the mortgage

Most mortgage brokers generally a. lend their own funds. b. use money provided by other investors. c. service the loans they make. d. only make loans on large properties.

b. use money provided by other investors.

An overencumbered property would be one with a market value of a. $125,000 with a first mortgage of $75,000 and a second mortgage of $26,000. b. $375,000 with a first mortgage of $25,000 and a second mortgage of $200,000. c. $120,000 with a first mortgage of $110,000 and a second mortgage of $15,000. d. $49,500 with a first mortgage of $20,000 and a second mortgage of $1,000 and a third mortgage of$2,000.

c. $120,000 with a first mortgage of $110,000 and a second mortgage of $15,000.

The tenant has signed a percentage lease. The terms of the lease are $500 per month plus an annual payment equal to 9% of gross sales over $250,000. If, at the end of the year, the tenant is celebrating a million dollars in gross sales, how much additional rent does he still owe? a. $6,000 b. $61,500 c. $67,500 d. $73,500

c. $67,500

Which of the following involves the greatest risk to a lender? a. First mortgage b. FHA loan c. Construction loan d. VA loan

c. Construction loan

Freddie Mac was originally formed to provide a secondary mortgage market facility for the a. Federal National Mortgage Association. b. Government National Mortgage Association. c. Federal Home Loan Bank Board. d. Mortgage Guaranty Insurance Corporation.

c. Federal Home Loan Bank Board.

What feature in an adjustable rate mortgage protects the borrower against very large monthly payment increases? a. Index rate b. Adjustment period c. Interest rate cap d. Margin

c. Interest rate cap

Which of the following specializes in making loans and reselling them? a. FNMA b. Mortgage brokers c. Mortgage bankers d. VA

c. Mortgage bankers

Which of the following specializes in bringing lenders and borrowers together without lending their own money? a. Insurance companies b. Mortgage bankers c. Mortgage brokers d. Commercial banks

c. Mortgage brokers

An elderly couple is "house rich, money poor". To obtain money now while still living in their magnificent home, they should look for a a. negative amortization. b. an adjustable rate mortgage. c. a reverse annuity mortgage. d. a graduated payment mortgage.

c. a reverse annuity mortgage.

A blended-rate loan arrangement is designed to a. raise the rate of interest to the buyer. b. lower the sales price of the property. c. attract buyers who are discouraged by high interest rates. d. pay off a loan sooner.

c. attract buyers who are discouraged by high interest rates.

ARM loans with teaser rates are avoided by a. mortgage insurers. b. secondary market buyers. c. both a and b. d. neither a nor b.

c. both a and b.

Under the terms of a shared appreciation mortgage a. the loan is made at a below-market interest rate. b. the lender received a portion of the property's appreciation. c. both a and b. d. neither a nor b.

c. both a and b.

Commercial banks are most likely to deal heavily in a. house boat loans. b. mobile home purchase loans. c. construction loans. d. residential home loans

c. construction loans.

A valid, written lease will automatically be terminated by a. death of the lessor. b. sale of the leased premises. c. court eviction of the tenant. d. imprisonment of tenant

c. court eviction of the tenant.

The secondary mortgage market is an area of activity in which a. a borrower may get loans if the primary market cannot accommodate them. b. second mortgages are made. c. existing mortgages are bought, sold and discounted. d. foreclosed properties are bought and sold.

c. existing mortgages are bought, sold and discounted.

The interest rate of an adjustable rate mortgage may rise or fall based on the a. interest rate cap. b. adjustment period. c. index. d. margin.

c. index.

One may find financing for a single family dwelling at all of the following EXCEPT a. savings and loans. b. commercial banks. c. insurance companies. d. mortgage bankers.

c. insurance companies.

With regard to real estate loans, life insurance companies tend to favor a. single family houses. b. interim construction loans. c. large commercial buildings. d. not being involved in real estate.

c. large commercial buildings.

A primary mortgage lender is one who a. lends to FNMA, FHLMC and GNMA. b. pools, insures, guarantees and sells first mortgage loans. c. lends to borrowers, services the loans and perhaps sells the instruments to another. d. lends only for first mortgages and deeds of trust.

c. lends to borrowers, services the loans and perhaps sells the instruments to another.

With regard to renting one vacant apartment, advertising money is usually most effectively spent on a. radio ads. b. television ads. c. newspaper. d. billboards.

c. newspaper.

A lessee is in possession of a valid lease when a buyer agrees to assume a veteran's loan and close a sale subject to the lease. The earnest money contract is signed before the lease is due to expire. The lease can a. be terminated immediately. b. be changed by the new buyer. c. not be terminated by the buyer. d. be terminated at close of escrow.

c. not be terminated by the buyer.

A couple's one year lease has expired, but they continued living on the premises. If they now pay rent on a monthly basis, this type of tenancy is a. by the entireties. b. at will. c. periodic. d. at sufferance.

c. periodic.

A lender who continues to collect mortgage payments even after selling the loan is said to be a. originating loans. b. laundering money. c. servicing the loan. d. discounting the loan.

c. servicing the loan.

Construction loans are a. long term, low risk. b. long term, high risk. c. short term, high risk. d. short term, low risk

c. short term, high risk.

If a lease were signed by a lessee who is a minor, the lease is a. void. b. voidable by the landlord. c. voidable by the tenant. d. unenforceable.

c. voidable by the tenant.

Which of the following are designed to prevent disintermediation? a. Adjustable rate mortgages b. Secondary mortgage markets c. Pass-through certificates d. Certificates of deposit

d. Certificates of deposit

All of the following may be used for setting ARM interest rates EXCEPT a. one-year U.S. Treasury securities. b. six-month Treasury bills. c. cost of funds to thrift institutions. d. Gross National Product is not used to set ARM interest rates.

d. Gross National Product is not used to set ARM interest rates.

Which of the following is most likely to specialize in large, commercial participation loans? a. Mortgage banks b. Savings and loans c. Farmers home loan association d. Life insurance companies

d. Life insurance companies

Which of the following sources provides the most home mortgage money in the United States? a. Mutual savings banks b. Commercial banks c. Credit unions d. Mortgage companies

d. Mortgage companies

To whom can a borrower turn for a direct loan for the financing of a single-family dwelling? a. Federal Housing Administration b. Mortgage broker c. Insurance company d. Savings and loan institutions

d. Savings and loan institutions

Which of the following supplies money to finance home loans? a. Fannie Mae b. FHA c. VA d. Savings and loans

d. Savings and loans

A valid lease must contain a. an option. b. the signatures of at least three parties. c. a clean-up deposit. d. a property description.

d. a property description.

An individual who is contemplating the purchase of a mortgage as an investment should have a. the property appraised. b. a credit check made on the borrower. c. the title searched. d. all of the above.

d. all of the above.

Computerized Loan Origination (CLO) programs are available to a. mortgage brokers. b. real estate brokers. c. attorneys. d. all of the above.

d. all of the above.

Other lenders providing mortgage money might include a. pension and trust funds. b. credit unions. c. commercial finance companies. d. all of the above.

d. all of the above.

The total transfer of a tenant's rights to another person is called a. an option. b. a sublet. c. a waiver. d. an assignment.

d. an assignment.

A lease for six months is classified as a. a periodic estate. b. an estate at sufferance. c. an estate at will. d. an estate for years.

d. an estate for years.

Fannie Mae buys and sells all mortgages EXCEPT a. FHA loans. b. VA loans. c. conventional loans. d. chattel mortgages.

d. chattel mortgages.

If a shopping center building collapsed and several of the tenants' stores could not be reopened, the effect on the tenants' leases would be a. actual eviction. b. an act of God eviction. c. a sandwich lease. d. constructive eviction.

d. constructive eviction.

Residential landlord tenant laws recently enacted in many states have modified the reliance on common law and contract tenancy right. These changes include all of the following EXCEPT a. the landlord must supply a fit and habitable premise. b. limits on the amount of security deposit that can be required. c. statutory procedures required for collecting back rent and evicting a tenant. d. defining a leasehold as a recordable real property belonging to the tenant.

d. defining a leasehold as a recordable real property belonging to the tenant.

A tenant seeking both flexibility for himself and commitment from the landlord would request a a. participation clause. b. month-to-month lease. c. long-term lease. d. lease with options to renew.

d. lease with options to renew.

Lenders who could be described as investing a major portion of their assets in long-term real estate loans, preferring not to service their own loans, and favoring large commercial properties would be a. commercial banks. b. savings and loans. c. mutual savings banks. d. life insurance companies.

d. life insurance companies.

An investor can invest in mortgages by purchasing all EXCEPT a. Ginnie Mae pass-through certificates. b. Freddie Mac participation certificates. c. junior mortgages. d. municipal bonds.

d. municipal bonds.

Prior to the introduction of adjustable rate mortgages, the FHLBB approved the use of a. variable rate mortgages. b. renegotiable rate mortgages. c. both a and b. d. neither a or b.

d. neither a or b.

A new home developer who is including appliances with the sale of each house most probably would assist the buyer in obtaining a a. blanket mortgage. b. shared appreciation mortgage. c. equity sharing mortgage. d. package mortgage.

d. package mortgage.

A builder bought all 20 lots in a subdivision from the developer, who carried most of the purchase price on one loan. To sell the lots, he must include a a. reverse loan clause. b. sale-lease back clause. c. package mortgage clause. d. partial release clause.

d. partial release clause.

The best definition of fair market value is the a. value as determined by a fee appraisal. b. highest price a seller can get for his property. c. tax assessed value. d. price a willing buyer will pay and a willing seller will accept, given a reasonable amount of time to effect the sale.

d. price a willing buyer will pay and a willing seller will accept, given a reasonable amount of time to effect the sale.

The phrase "taking back paper" applies to a. a cash sale. b. conventional loans. c. VA loans. d. seller financing.

d. seller financing.