Finance Final

Your client, Bruno, is an investor. He is in the process of selling a fourplex and mentions to you that he hates the idea of the capital gains tax he'll be subject to. What should you tell him?

"You might consider a 1031 tax-deferred exchange."

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

$1,146.67

The total amount that's treated as home acquisition debt for tax purposes has to be less than ______ for married couples filing jointly.

$750K

What feature is a key benefit of the VA guaranteed loan for veterans?

100% financing

According to the PMI Act of 1998, at what percentage of equity position does personal mortgage insurance cancel for homeowners?

22%

Brenda and Joe have 20% cash to put down toward the purchase of their home, and they have great credit. What might be their best option for getting a traditional mortgage loan?

A commercial bank

The Kimballs and their lender have agreed to a loan modification. How is the loan modification documented?

A loan modification agreement is signed, notarized, and recorded.

The amount of the funding fee for a VA loan is calculated as ______.

A percentage of the loan amount

Which of the following statements best describes a mortgage broker?

A person who works with multiple lenders to find the product that works best for the client

What is an acceleration clause in a mortgage?

A provision that allows the lender to call for the loan balance to be repaid immediately on borrower default

Which clause in a mortgage or deed of trust describes the borrower actions that constitute default and allow the lender to make the debt immediately due and payable?

Acceleration

Which of these is a requirement for a property purchased using the VA guaranteed loan program?

Be owner-occupied

Brian has just finished completing his loan application and has gathered supporting documentation needed to determine whether the application will be approved. Which of these parties best describes who Brian is?

Buyer

On a VA loan, the ______ helps the lender determine if the value of the property makes it suitable for use as collateral on the loan.

CRV- certif of reasonable value

Seller concessions on a VA loan ______.

Can't exceed 4% of the sales price

Dylan is in default on her mortgage. She decides to hand over the deed to her property rather than face foreclosure proceedings. This is an example of ______.

Deed in lieu of foreclosure

What's another term for voluntary conveyance?

Deed in lieu of foreclosure

______ is directly influenced by factors such as employment levels and wages, interest rates, population changes, confidence in the market, and availability of loans.

Demand

What federal executive-level agency works to implement goals that ensure affordable housing, protect consumers, and build inclusive communities in the U.S.?

Department of Housing and Urban Development

The lender, the loan applicant, and the _______ all complete parts of the request for verification of deposit form.

Depository institution

Mutual savings banks are concentrated mostly in the ______ U.S.

Eastern

A defect on a title that can be monetary or physical is called an ______.

Encumbrance

What entity oversees Fannie Mae and Freddie Mac, and regulates the Federal Home Loan Bank?

Federal Housing Finance Agency

What instrument is used to record the conversion to an ARM from a fixed rate of interest?

Fixed/adjustable rate note

Which of the following statements is true about the FHA annual mortgage insurance premium?

It's paid by the borrower over the life of the loan and is recalculated annually.

Bambi is buying a property on an installment sales contract. Due to her financial interest in the property, she retains equitable title. What does the seller retain?

Legal title

Shelly received Brian's loan application and provided him with a loan estimate. Who does Shelly most likely represent?

Lender

The FHA sets limits on how much of a loan it will insure based on the ______.

Median home price for the area and property type

When a loan is recasted, what does it essentially become?

New loan

Dawn and John own a home together, but they're getting a divorce. They agree that John will keep the house and assume the loan they signed together. Will the alienation clause in their security document prevent the assumption?

No, because lenders may not enforce an alienation clause if the assumption is part of a divorce settlement.

How are real estate investment trusts sold?

On a major exchange like stocks

What is a qualified mortgage?

One that meets certain lending standards

Which type of agreement is used for large commercial real estate projects?

Partnership between mortgagees

This statement is part of a promissory note attached to a security instrument: "I have the right to make payments of Principal at any time before they are due." What's the name of the clause where this statement is included?

Pre-payment clause

Traditionally, what represents supply and demand in the real estate market?

Properties and buyers

Completing a residential loan application requires providing information about the borrower, the loan being applied for, and the ________.

Property being purchased

Which are phases of the real estate cycle?

Recession, recovery, expansion, over supply

The Real Estate Settlement Procedures Act is a consumer protection statute that ______.

Requires lenders to provide the consumer with certain disclosures for residential real estate transactions and prohibits kickbacks among settlement service providers

What is the ability to pay off liens against a property until a foreclosure sale is held?

Right of redemption

Which approach to value used by appraisers relies on the sales price of comparable properties to help determine the adjusted market price?

Sales comparison approach

The Bakers are selling their home, and they've picked the perfect time. The market isn't saturated with a lot of properties for sale, but there are many buyers looking to make a purchase. What type of market is this?

Seller's market ;When there are more buyers than there are properties, the seller has the advantage. This is a seller's market.

Per the Real Estate Settlement Procedures Act (RESPA), licensees may not receive or give referral fees or finder fees (or anything of value) from/to whom?

Settlement service providers

Why do lenders care so much about property condition?

The property is collateral for the mortgage.

Juanita invests in mortgage-backed securities. What is the likely impact on her as an investor when mortgage interest rates rise?

The returns on her investment may increase.

Which of the following best describes a property's assessed value?

The value placed on the property by the local jurisdiction's taxing authorities to calculate property taxes.

What is an initial cap, as it relates to an adjustable rate mortgage?

The value that limits the amount that interest can adjust at the mortgage's first interest rate adjustment

What is a periodic cap, as it relates to an adjustable rate mortgage?

The value that limits the amount the rate can adjust at subsequent adjustment dates

What is a lifetime cap, as it relates to an adjustable rate mortgage?

The value that limits the amount the rate can adjust over the life of the loan

Which of the following best explains the alternative foreclosure types, such as foreclosure by writ of entry?

They are an additional means of foreclosure that are to be used as a back-up to the legal process, but not in lieu of that process.

For what reason do borrowers commonly seek the assistance of individual private lenders?

They're unable to find complete financing elsewhere.

The primary FHA loan program used to purchase a one- to four-family home is ______ of the National Housing Act.

Title II, Section 203(b)

What are debentures?

Unsecured bonds

Planning, construction, buying/selling, and moving are four of the five new-home construction phases or activities that impact the economy. What's the fifth?

living

Your client exchanged one property for a similar property and did not have to pay capital gains taxes that year. How did he do this?

He did a tax-deferred exchange.

______ is directly influenced by construction of new homes, conversion of existing properties to residences, and construction costs.

Supply

Which U.S. Department of Veterans Affairs program allows a veteran to refinance a conventional loan to a VA loan?

Cash-Out Refinance

Which federal lending act was introduced to combat lending discrimination in low- and moderate-income neighborhoods?

Community Reinvestment Act

Which of these activities has a far-reaching effect on the country's overall economy and is the largest indicator of the country's economic health?

Construction of new homes

Which term describes the action taken to force a sale of real property encumbered by a lien?

Foreclosure

In a hypothecation scenario, the borrower owns the property and has possession rights. What does the lender have?

Foreclosure rights (if the buyer defaults)

A borrower makes the same monthly mortgage payment for the entire term of the loan. At the end of the loan period, all of the interest and principal is paid off. What type of loan is this?

Fully amortized

The U.S. Department of Veterans Affairs offers special programs, which can be used to adapt housing to accommodate the disability, to veterans or military members with permanent and total service-connected disabilities. What are these programs?

Grants

Which loan type is a fixed-rate mortgage where the monthly payments increase over time, according to a set schedule?

Growing equity

Which of the following best describes what Ginnie Mae does in the secondary mortgage market?

Guarantees mortgage-backed securities

Assisting in the purchase of repossessed homes, ensuring that all clients receive fair and equitable treatment, and recommending FHA financing to a client are all ways that a licensee makes use of ______.

HUD and its program

Melvina has a Home Equity Conversion Mortgage. She feels secure because she knows that ______.

Her lender will continue to make payments to her as long as she remains in her home

With which approach to value does the appraiser analyze a property's ability to earn future income?

Income approach

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

Increase

Which scam, as described by the FBI, involves an appraiser working secretly with a borrower and providing a fraudulent appraisal report to the lender?

Inflated appraisal

How does the Federal Housing Administration help prospective homeowners?

Insuring lenders against borrower default so they assume less risk of buyer default

Manny is obtaining a home loan. He goes to his local bank and talks with Deborah, who discusses the lending products the bank offers. What is Deborah?

Mortgage banker

Bernie works for Quickwell Lending and accesses several lenders to find a loan product that works best for his clients. What is Bernie?

Mortgage broker

Which of the following is a difference between mortgage brokers and mortgage bankers?

Mortgage brokers work with multiple lenders, whereas mortgage bankers work with a single lender.

The SAFE Act is intended to help consumers select which professionals, knowing that they are honest and competent?

Mortgage loan originators

What are mortgage-backed securities?

Mortgages that are pooled together and sold to investors

With a no down payment VA loan, the mortgage can't be more than the amount of the ______.

Property's CRV

What's the acronym for the legislation that eliminates illegal referral fees among settlement service providers?

RESPA

Who typically performs a CMA or BPO?

Real estate licensee

Which type of lien is a specific lien?

Real property tax lien

M&R Lending has borrowers who are in default. Those borrowers have listed their house for sale and must obtain M&R's approval before they can accept any offers. What is this an example of?

Short sale- requires lender approval

Why is it common for lenders to sell mortgages on the secondary market?

So they can obtain additional funds to continue making loans available to the community

The Johnsons are shopping for a mortgage loan and are attracted to the below-market interest rate offered for the first year of an adjustable rate mortgage. What's this type of rate called?

Teaser rate

What program does the U.S. Department of Veterans Affairs offer to assist Native Americans in financing the purchase, construction, or improvement of homes on federal trust land?

The Native American Direct Loan

Some foreign lenders provide loans for real estate purchases in the U.S., but not many! Countries that had banks that issued real estate loans were Canada, Taiwan, and ______.

The U.K

Which of the following best describes market price?

The amount that a buyer has paid, and a seller has accepted for a property.

What does the cost approach to finding an appraised value measure?

The cost to acquire land and construct a reproduction

Which of the following is true regarding an appraiser's three approaches to value?

The income approach is most applicable to rental properties.

What's one of the main differences between a traditional mortgage loan and an interim loan?

The length of the loan differs.

What is a margin, as it relates to an adjustable rate mortgage?

The number of percentage points that are added to the index to determine the rate

Which of the following is used to protect the buyer from title defects after closing?

Title insurance policy

What's the purpose of a short sale?

To avoid foreclosure

What is HUD's stated mission?

To create strong, sustainable, inclusive communities and quality affordable homes for all

What's Fannie Mae's mission?

To help ensure all communities have access to mortgage credit

What's the most likely reason borrowers would choose a private loan company?

To provide extra funding to reach their goal when they can't secure it elsewhere

Which title search method only goes back as far as when the last title search performed, and assumes the last search was done accurately, legally, and that any issues were resolved?

Torrens system

Which factor that influences value addresses the ease with which the property can be conveyed to another?

Transferability

Which entity guarantees loans?

U.S. Department of Veterans Affairs

Charles is selling his home to Sheila. Charles has an existing loan that he will continue to make payments on. Charles is also extending credit to Sheila for the balance of the purchase price. Sheila will make monthly payments to Charles. What type of financing is used in this transaction?

Wrap-around loan

Ruby is selling her home. The buyer, who's not a veteran, would like to assume Ruby's VA loan. Is this allowed?

Yes, an assumption is allowed, but Ruby should have the buyer sign a release of liability, or she risks being held liable if the new borrower defaults.

Chris used the VA guaranteed loan program to purchase a home five years ago. He now wants to sell that house and buy a new one. Is Chris allowed to use the VA loan program a second time?

Yes, but Chris will need to apply to have his entitlement restored once the original loan is paid off with the sale of the home.