Pearson VUE Exam Prep: Additional Government Influence in TX Study Guide

What is the formula for calculating the total debt ratio?

(monthly debt payments / gross monthly income) x 100

Which percentage reflects the top debt to income ratio limit for qualified mortgages?

43%

What is a government sponsored enterprise?

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

What is meant by pass through taxation?

Business income is taxed on the owner's personal return

Which of the following is NOT part of the Other Considerations section of the Loan Estimate?

Comparisons

Which of the following describes amortized debt?

Debt that's paid off by making periodic payments

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

Expansion

From a secondary market player, Reginal state bank received an advance in exchange for collateral in the form of mortgages. Which entity likely issued this advance?

Federal Home Loan Bank

Which entity regulates government sponsored enterprises?

Federal Housing Finance Agency

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

Fie a suit a quiet title

Which of these agencies is a government sponsored enterprise?

Freddie Mac

Payment history age of accounts, credit usage and types of accounts are factors considered in calculating a credit score. What's also a factor?

Inquiries

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

Sean hasn't paid his property tax. The tax collector places a lien on his property. How is the lien classified?

Involuntary, specific

Normal wages are considered when a lender is evaluating an applicant's income. Which of the following must be true for overtime pay to be considered?

It must have been received regularly over the last two years

What impact did the authorization of the Credit Union Membership Access Act have on credit unions?

It removed the union worker only membership restriction

The CFPB uses education to accomplish its mission such as the __________ publications

Know before you owe

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

Liens are paid based on date of filing

FHA county loan limits are based on

Median price for the area and property type

Who originates their own loans?

Mortgage bankers

What does NCUA stand for?

National Credit Union Administration

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

Not be delinquent on mortgage payments

HUD's __________ has a goal of increasing the availability of safe and affordable housing to Native American Families

Office of native American programs

Chanel is buying a brand new home with a VA loan. She's obtained a certificate of reasonable value. For how long is that CRV valid?

One Year

While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.

Only total debt to income

Which of the following statements is true regarding closing costs on a VA loan?

Payment of closing costs may be negotiated

Kara is a lender who is working with prospective buyer, Stan. What does Kara ask Sam to provide to show his work history and earning information?

Paystub

During which phase of the real estate loan cycle is local government most directly involved?

Planning

What does REIT stand for?

Real Estate Investment Trust

A lender qualifies a borrower for a VA loan based on

Residual income and debt to income

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

Set rules and regulations that member banks must follow

Melanie is a buyer who has agreed to purchase Stan's property using a contract for deed. Who holds legal title to the property during the term of the loan?

Stan

Rules and regulations that protect consumers of financial services are now the responsibility of __________ which was created by the Dodd Frank Act

The CFPB

What government agency handles ECOA complaints?

The Consumer Financial Protection Bureau

Which of the following was created as a result of the Housing and Economic Recovery Act?

The Federal Housing Finance Agency

Which act establishes general requirements that state agencies must follow when adopting rules or conducting contested cases?

The Texas Administration Procedures Act

Tom's CRV came in low and he's decided to make up the difference in cash. What else will be required?

The VA may require Tom to prove the source of his funds

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

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

a global market for mortgage backed securities

The Farm Credit system is

a government sponsored enterprise

Which property is Bertrand appraising if he's using the income approach?

a three unit rental property

When a buyer takes over the seller's original loan with the lender's permission this is called

an assumption

__________ is a legal action that liquidates or restructures debt. It can have a long lasting negative impact on the borrower's ability to obtain financing

bankruptcy

to qualify as a texas veteran, a person must

be at least 18 years old

Which of these appraiser requirements does AIR NOT specify?

be knowledgeable about the global market rates

As part of a defiencey judgement sought by a lender, a __________ may be placed on any current and future property the borrower owns until the lender recovers all losses.

blanket lien

What is one way that the FHA has helped to stablize and improve mortgage market?

by requiring appraisers to be state licensed or certified to evaluate property for FHA insured loans.

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

collateral

In a loan to purchase which of the following property types is NOT eligible for purchase by Fannie Mae?

commercial space

Commercial banks offer interim financing in the form of ______ loans

construction

A second mortgage on property secured by a VA loan is acceptable under certain conditions, one of which is that the first and second mortgage liens

don't exceed the CRV

How might a borrower avoid paying the mortgage insurance premium required by an FHA loan?

get conventional financing

Freddie Mac

is regulated by the Federal Housing Finance Agency

Armitage Bank is placing the Kellermans in default for failure to pay their homeowners insurance. the lender is concerned about property damage and

judgement liens

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

Making a down payment than obtaining a loan is an example of

leveraging

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

medium of exchange

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

over supply

When the Treasury collects fewer funds than what is needed to pay the government's bills, what action might it take?

sell securities

After bonds are _________, their value goes up and down with the market

sold

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

spend billions

The upfront MIP on an FHA loan is calculated on

the base loan amount

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

the buyer's lender

The FHA has helped to significantly improve the mortgage market through

the introduction to the long term amortized loan

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

to get a lower interest rate

Kendra has applied for a mortgage with Best Bank. When is Best Bank required to provide Kendra with a loan estimate?

3 business days.

What must a qualified mortgages loan term limit be?

30 years or less

The VA loan program offers a basic entitlement of

36,000

Interest rates that are more than __________ over the current market rate are considered predatory lending.

5

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

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

What's the term for a loan modification in which the outstanding loan balance is reconfigured?

recasting

A mortgage that allows the lender to sue the borrower for damages if foreclosure occurs is called a ___________ mortgage

recourse

__________ 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 expensses

residual income

More than 70% of the assets of mutual savings banks are derived from

savings accounts

What is a carryback loan?

A second loan financed by the seller

Regional State Bank has made a lot of loans to consumers in the community and is running low on funds. It seeks a loan from Federal Home Loan Bank. This loan is called a(n)

Advance

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

sell securities

Under current law, what's the maximum tax free gift an individual can give to another individual annually?

15,000

Which of the following represents a potential concern when borrowing funds from a pension or retirement plan?

Borrowing without consulting a financial expert can result in unintended consequences, such as income tax liability and loss of retirement income

Which of the following loans may require compliance with Appraiser Independence Requirements?

Conventional

Which real estate finance instrument includes the promise to repay and the security instrument within the same document?

Deed

What process temporarily stalls foreclosure?

Filing for chapter 7 bankruptcy

Which of these transactions must comply with Appraiser Independence Requirements?

Four unit residence being purchased with a conventional loan

How do VA loan programs compute "residual income"?

Income minus shelter expenses and debts

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

It will decrease each year as the loan is paid down

The interest rate on an FHA Section 251 loan is adjusted based on

Market indices approved by the FHA

What's the definition of a qualified mortgage?

One that meets stringent CFPB guidelines

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

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

Race and ethnicity

With this IRA, withdrawals of contributions are tax-free.

Roth IRA

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

The funding fee on a VA loan is waived when

The veteran has 10% or higher VA disability

Why are vision and life insurance optional for real estate licensees to purchase?

They're not required for their profession or the lawW

What is the purpose behind Appraisal Independence Requirements?

To protect appraisers ability to assess an accurate value for a property by avoiding outside pressure or influence

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

paying down outstanding credit card debt

Who's the mortgagee in a mortgage?

the lender

What is the most likely effect when the FED buys securities on the open market?

The economy may grow due to an increased money supply

Jackson has received several inquiries on his credit report. Which of these inquiries was one he did not initiate?

credit monitoring

What's the term for an extended period of time during which banks experience more withdrawels than deposits?

disinterminidation

Chapter 5 of the Texas Property Code set requirements and penalties for ______.

executory contracts

One common predatory lending practice is to charge fees for unnecessary or ______ loan products or services.

non-existent

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

quality affordable rentals

What factors directly affect an adjustable rate mortgage?

rate, index, and margin

Institutions that purchase loans, package them into mortgage backed securitites, then sell these to investors may commonly be referred to as

secondary market players

Which item would an appraiser find in the Improvements section of the Uniform Residential Appraisal Report?

Year Built

Which of the following is true about a home equity line of credit

a borrower can use the funds as needed, repay them, and borrow them again

Which of the following would be the best place to keep monies intended for long term savings

a certificate of deposit

Which of the following would the FDIC most likely insure?

certificates of deposit

What do loans create for banks and other financers?

future cash income

Jerry is appraising a five-bedroom home in the suburbs. After identifying the purpose of the appraisal, what does he need to do next?

identify the data that is needed

Which of the following best describes an equity real estate investment trust

invests in equity by owning income producing property, such as malls, apartments or office perks

Which of the following clauses is included in Fannie Mae's muli state note?

late charge

which of the following is a passive type of real estate investment

limited partnership

Which of the following is an example of an involuntary specific statutory lien?

materialiams' lein

Residential property owner's dont often default on property taxes. why not?

property taxes are usually paid with the monthly mortgage payment

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

shadow inventory

What's the first step an appraiser will perform when conducting an appraisal?

state the problem

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

subprime

Which of the following is a true statement about borrower qualifications standards for a VA loan guaranteed

the applicant must have a certificate of eligibility

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

the federal reserve

Maria is applying for a loan. maria's employer has been asked to provide employment verification. Who else must complete parts of the request for proof of employment?

the lender

Who should sellers consult before agreeing to carry part of a loan for a buyer?

their financial advisor

When a promissory note is sold, what is recorded in county land records?

assignment of security instrument the note is attached to

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

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

calculated cash to close

Private loan companies may charge higher interest, larger fees, and could require ______ to secure a loan.

collateral

Which entity sets the requirements for qualified mortgages?

consumer financial protection bureau

What program allowed the U.S. Treasury to spend hundreds of billions of dollars to stabilize our financial system, boost credit markets, help families avoid foreclosure, and promote economic growth

troubled asset relief program

Which of the following is considered an ineligible property type for which a loan to purchase or refinance wouldn't be purchased by Fannie mae?

vacant lot

A Treasury note is a Treasury security ______.

with a maturity term between two and 10 years

The american recovery and reinvestment act provided mortgage assistance to

wounded serviceman and servicewomen

Freddie Mac targets which type of loans to purchase?

conventional

The acronyom for PITI is a reference to what real estate related concept?

mortgage payment

Andrea's lender has notified her of its intent to foreclose. Her loan is secured with a deed of trust. What rights does she have to redeem her property?

Andrea can cure the default and reinstate the loan

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 involves both residential and commercial properties?

Mortgage REIT

What person or entity works with many different lenders to find the best loan for the consumer?

Mortgage broker

What type of partnership is a real estate mortgage investment conduit?

Partnership between mortgagees

RESPA prohibits kickbacks between which parties?

Settlement service providers

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

How is a loan assumption documented?

The buyer and seller both sign an assumption agreement.

A vendor and vendee are the parties involved when the finance instrument is ________

contract for deed

The three types of finance instruments that can be used when financing a real estate purchase are the note with mortgage, note with deed of trust and

contract for deed

Financing for a real estate transaction can use a note with a ________, a note with a deed of trust

mortgage