Real Estate Finance

B (The community is potentially put at risk)

A multibillion dollar online retail distributor has decided to set up operations in Ashland. The population of Ashland is 22,000. What is the potential impact to the area? A. The community is not growing fast enough. B. The community is potentially put at risk. C. The community's economic stability is guaranteed. D. The community will not grow.

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

David purchased a house three years ago for $300,000. Considering historical property value fluctuations, what is the likely value of the property today? A. Exactly $300,000 B. It's difficult to tell. Historically, property values fluctuate up and down in the short term. C. Less than $300,000 D. More than $300,000

A (It was available in the states with the most underwater homeowners)

Which of the following is a true statement about the Hardest Hit Fund? A. It was available in the states with the most underwater homeowners. B. It was available to underwater homeowners in every state. C. It was designed for borrowers who were unemployed and underwater in their homes. D. It was designed to assist lenders that made the greatest percentage of subprime loans.

D (The economy may slow down due to a decreased money supply)

What is the most likely effect when the Fed sells securities on the open market? A. Banks will have more money to lend. B. Interest rates will decrease. C. The economy may grow due to an increased money supply. D. The economy may slow down due to a decreased money supply.

Millennials

Which generation financed their homes due to also having other debt obligations? Baby Boomers Echo Boomers Generation X Millennials

General contractors

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

Buyer's market

The supply of properties available in the market is greater than the number of buyers. What type of market does this describe? Bull market Buyer's market Expanding market Seller's market

Right of rescission

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

Seller's market

There are fewer properties available in the market than there are interested buyers. What type of market does this describe? Bear market Buyer's market Receding market Seller's market

Leveraging

Tonia is buying a new home. She has a down payment of $30,000 and will obtain a $250,000 mortgage from a local bank to make up the remainder of the purchase price. What is this an example of? Disintermediation Leasing Leveraging Levying

B (Inadequate resources to support the population)

Which of the following is a possible result of a community growing too fast? A. Communities can never grow too fast B. Inadequate resources to support the population C. The community enters a recession D. The economy stalls

B (Builders required by the state to recycle aluminum during demolition)

Which of the following is an event that has a direct impact on property? A. An increase in tariffs for overseas purchases B. Builders required by the state to recycle aluminum during demolition C. Closure of national parks D. Restriction of refugees permitted to enter the United States

Loan availability

Which of the following items directly influences real estate demand? Construction costs Construction of new homes Conversions to residential properties Loan availability

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

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? A. Her down payment of $50,000 isn't at least 20% of the purchase price. B. Her lender is a subprime lender. C. PMI is triggered at the $50,000 down payment amount. D. She has poor credit.

D (Fines up to $5,000 and up to a year of imprisonment)

Community Banks is being sued for intentionally violating the Truth In Lending Act. What fines and imprisonment possibilities can the company face? A. Fines up to $10,000 and five years imprisonment B. Fines up to $1,000 and a year imprisonment C. Fines up to $5,000 and five years imprisonment D. Fines up to $5,000 and up to a year of imprisonment

Living

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

A (Loan interest and mortgage packages sold on the secondary market)

How do mortgage lenders acquire income? A. Loan interest and mortgage packages sold on the secondary market B. Loan interest and refinancing C. Loan refinancing D. Mortgage packaging on the secondary market

B (By purchasing and consuming local goods and services)

How does the consumer provide economic support to a community in the living phase of the real estate cycle? A. By paying income taxes B. By purchasing and consuming local goods and services C. By purchasing construction supplies D. By purchasing moving services

Freddie Mac

One of the following entities is primarily a secondary market player. Which one? Credit union Freddie Mac Mortgage company Private investor

Disintermediation

River City Bank needs to cut back on lending. For several months, the bank has seen more withdrawals from customers than deposits. This has led to a decrease in deposits typically used for lending. What term can be used to describe what the bank has experienced? Bankruptcy Collateral Disintermediation Hypothecation

More than $50,000

Robert and Jill purchased a single-family home in the suburbs for $50,000 nearly 40 years ago. Considering historical property value fluctuations, what is the likely value of the property today? Close to $50,000 It's impossible to tell. Historically, property values have not followed a consistent pattern. Less than $50,000 More than $50,000

Unit of value

Store of value, medium of exchange, and what other factor define money? Depreciating asset Diminishing value Permanence Unit of value

Medium of exchange

Store of value, unit of account, and what other factor define money? Depreciating asset Diminishing value Medium of exchange Permanence

New homes

The construction of what type of structures is one of the largest indicators on the country's economy? Commercial space New homes Recreational properties Warehouses

Liquidity

The ease with which an asset is converted to cash is called ______. Foreclosure Leverage Liquidity Risk

Store of value

Unit of account, medium of exchange, and what other factor define money? Depreciating asset Diminishing value Permanence Store of value

Leveraging

When consumers make a small down payment, borrow the remaining amount of the purchase price from a lender, and reap the rewards off of the full investment value, they are demonstrating what concept? Collateral Disintermediation Leveraging Levying

D (Taxpayer Relief Act of 1997)

Which act exempted homeowners from paying taxes on capital gains up to a specified value? A. American Taxpayer Relief Act of 2012 B. Homeowner Affordability and Stability Plan C. Mortgage Forgiveness Debt Relief Act of 2007 D. Taxpayer Relief Act of 1997

A (American Taxpayer Relief Act of 2012)

Which act made some mortgage insurance premium deductions available to certain taxpayers? A. American Taxpayer Relief Act of 2012 B. Homeowner Affordability and Stability Plan C. Mortgage Forgiveness Debt Relief Act of 2007 D. Taxpayer Relief Act of 1997

C (Mortgage Forgiveness Debt Relief Act of 2007)

Which act temporarily removed the requirement that taxpayers whose homes were sold as a result of a foreclosure had to include the loan write-off amount as taxable income? A. American Taxpayer Relief Act of 2012 B. Homeowner Affordability and Stability Plan C. Mortgage Forgiveness Debt Relief Act of 2007 D. Taxpayer Relief Act of 1997

Baby boomers

Which generation are children of the Silent Generation and products of the U.S. population explosion after World War II? Baby Boomers Generation X Generation Y Millennials

Conversion of properties

Which of the following items directly increases the supply of real estate properties on the market? Conversion of properties High employment wages Loan availability Low interest rates

B (Decrease lending activity)

As foreclosures increased in 2007, what was the response from lenders? A. Borrow money from the federal government B. Decrease lending activity C. Increase lending activity D. Refinance mortgages for troubled homeowners

Increase

As interest rates fall, what is the number of buyers in the market likely to do? Act independently from interest rate changes Decrease Increase Remain steady

Buying/Selling

During which phase of the real estate cycle does a real estate professional have the most direct impact? Buying/selling Construction Living Planning

Planning

During which phase of the real estate cycle is local government most directly involved? Construction Living Moving Planning

Construction

Edward is an economic analyst. In his work, he keeps a particularly close eye on this industry, because action or inaction here is a leading indicator of the country's overall economy. Which industry is this? Construction Education Healthcare Manufacturing

Hypothecation

In a mortgage, the property is used as collateral for the loan. What's the term for the process of pledging something as collateral? Hypercollateral Hyperinflation Hyperventilation Hypothecation

Mortgage-backed securities

In the secondary market, how are mortgages grouped together and sold? Collateral Equitable titles Leverage Mortgage-backed securities

D (The right to foreclose if the borrower defaults)

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? A. Equitable title B. Mortgage title C. Reversionary interest D. The right to foreclose if the borrower defaults

A (A change in zoning ordinances)

Suppose you live and work in the north-central U.S. Which of the following factors would have a direct impact on property at the local level? A. A change in zoning ordinances B. An oil spill on the Texas coast C. National environmental regulations D. National mid-term elections

Reserve Requirements

The amount of money a member bank must keep on deposit at its reserve district bank describes ______. Down payments Principal Reserve loans Reserve requirements

Open-market operations

The buying and selling of government securities as a way to influence the money supply and balance economic growth describes ______. Discount window Federal funds rate Open-market operations Reserve requirements

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

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? A. APR and finance charges only B. No information is required, but lenders are strongly encouraged to disclose as much information as possible. C. Payment schedule, APR, finance charges, pre-payment penalties, late penalties, and total financed amount D. Payment schedule, lender name, APR, and secondary market holder

Future cash income

What do loans create for banks and other financiers? Fewer jobs Future cash income Guaranteed income Loss of cash flow

C (Member banks must keep more assets on deposit at the reserve bank)

What does it mean if the Fed increases reserve requirements? A. Member banks can keep fewer assets on deposit at the reserve bank. B. Member banks must increase interest rates on loans they make. C. Member banks must keep more assets on deposit at the reserve bank. D. Member banks must lend more money to the public.

B (Makes borrowing less expensive)

What effect do low interest rates have on borrowing? A. Makes borrowing impossible for most consumers B. Makes borrowing less expensive C. Makes borrowing more expensive D. Makes it harder to borrow

C (Increase in economic growth)

What is the general economic impact of mortgage loan payments? A. Collapse of economic growth B. Decrease in economic growth C. Increase in economic growth D. Segregation of economic classification

A (Cash Out Refinance)

Which of the following VA programs requires a credit check, new appraisal, and income verification? A. Cash Out Refinance B. IRRC C. Negative amortization conversion D. Senior disability refinance

Decreased rates

Which of the following actions did the Federal Reserve take in response to the 2007 financial crisis? Decreased rates Decreased reserve requirements Increased rates Increased reserve requirements

A (A standardized measure for interest rates and other loan costs)

Which of the following best describes annual percentage rate (APR)? A. A standardized measure for interest rates and other loan costs B. Fees charged by a lender, expressed as a percentage that's always rounded to the nearest whole percentage point C. The amount a borrower pays in interest for a single year D. The amount a lender is permitted by federal law to collect in interest from a borrower during a single year

C (Using a house as security on a mortgage)

Which of the following best describes collateral? A. Signing over a car's title to a family member B. Taking of a property by the government for the greater good of the public C. Using a house as security on a mortgage D. Using a small amount of cash to obtain a loan of a larger amount

A (The rate at which a bank can obtain a loan from another bank)

Which of the following describes the federal funds rate? A. The rate at which a bank can obtain a loan from another bank B. The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral C. The rate at which a bank or lender may loan money to its most creditworthy borrowers D. The rate at which borrowers can refinance their mortgage

Local credit union

Which of the following entities commonly acts in the primary market? Fannie Mae Federal Home Loan Bank Local credit union Private investors

D (Using a small amount of cash to obtain a loan of a larger amount)

Which of the following is a description of leveraging? A. Encouraging an appraiser to value a property higher B. Foreclosing on a property when a borrower defaults on a loan C. Taking of personal property by the government, for the good of the public D. Using a small amount of cash to obtain a loan of a larger amount

B (Banks don't have access to additional funds)

Which of the following is a likely effect when the discount window is closed? A. Banks are restricted from making loans to consumers. B. Banks don't have access to additional funds. C. Banks have access to additional funds through their district reserve bank. D. Interest rates plummet.

B (Consumer Financial Protection Bureau)

Which of the following is designed to make consumer financial products and services fair and transparent? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Consumer Financial Protection Bureau C. Home Affordable Modification Program (HAMP) D. Home Affordable Refinance Program (HARP)

B (Making a down payment)

Which of the following is the best example of the economic principal of leveraging, as it applies to a real estate transaction? A. Completing the loan process B. Making a down payment C. Making the loan payments D. Purchasing title insurance

Construction

Which of the following items directly influences real estate supply? Construction Employment wages Interest rates Loan availability

C (Home Affordable Refinance Program (HARP))

Which of the following programs broke the normal 80/20 ratio rule usually required as a loan-to-value and offered favorable interest rates? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Home Affordable Modification Program (HAMP) C. Home Affordable Refinance Program (HARP) D. Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

D (REIT analysts and bond rating agencies)

Which of the following resources are extremely helpful when working with investors? A. Banking and insurance analysts B. Fannie Mae, Freddie Mac, and Ginnie Mae C. IRS and RealtyTrac® D. REIT analysts and bond rating agencies

A (The funds available to consumers froze)

Which was NOT part of the Fed's program quantitative easing? A. The funds available to consumers froze. B. The interest rate decreased. C. The offer of lending money to financial institutions. D. The purchase of securities.

Recovery

What step of the real estate cycle generally follows recession? Expansion Hyper supply Over-supply Recovery

D (The economy headed into a recession)

In response to the increase in foreclosures and losses on their balance sheets, not to mention a reduced market for subprime loans, many lenders slowed their lending activities. What was the impact of this on the overall economy? A. Businesses expanded and hired additional employees. B. Construction of new homes increased. C. The economy expanded. D. The economy headed into a recession.

Discount

The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral is called the ______ rate. Discount Federal funds Fixed Prime

A (Member banks can keep fewer assets on deposit at the reserve bank)

What does it mean if the Fed decreases reserve requirements? A. Member banks can keep fewer assets on deposit at the reserve bank. B. Member banks cannot lend as much money to the public. C. Member banks must increase interest rates on the loans they make. D. Member banks must keep more assets on deposit at the reserve bank.

D (The reserve percentage is increased by the Fed)

What is a potential cause for a decrease in local economy driven by the Fed? A. Consumers are closing accounts at local banks. B. Consumers are no longer using cash. C. Consumers are using more cash. D. The reserve percentage is increased by the Fed.

C (The Fed regulates the U.S. depository institutions)

What is the purpose of the Federal Reserve System? A. The Fed controls consumer spending. B. The Fed monitors international trade. C. The Fed regulates the U.S. depository institutions. The Fed sets minimum and maximum loan distribution.

Subprime

What term is used to describe loans that were approved for borrowers with lower incomes and poor credit histories? Ill-advised Prime Subpar Subprime

Shadow inventory

What term is used to describe the housing inventory in default or foreclosure? At-risk inventory Flooded inventory Shadow inventory Shallow inventory

C (New construction and home purchases would greatly decrease)

What would likely happen to the real estate market if there were no lenders? A. Construction of new homes would increase. B. Homeownership would increase. C. New construction and home purchases would greatly decrease. D. Nothing would happen.

Disintermediation

What's the term for an extended period of time during which banks experience more withdrawals than deposits? Bankruptcy Collateral Disintermediation Hypothecation

The right to foreclose

When a lender has a lien on a property via a mortgage, what rights does the lender hold? Air rights Possession rights The entire bundle of rights The right to foreclose

A (Federal Open Market Committee)

Which government entity oversees open-market operations? A. Federal Open Market Committee B. International Monetary Fund C. U.S. Mint D. U.S. Treasury

D (Wall Street Reform and Consumer Protection Act (Dodd-Frank Act))

Which governmental legislation established the Consumer Financial Protection Bureau? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Home Affordable Modification Program (HAMP) C. Home Affordable Refinance Program (HARP) D. Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

B (Increases in hiring, employment, and public confidence, and lots of buyers in the market)

Which of the following best describes the state of the market during the expansion phase of the real estate cycle? A. High but stabilized unemployment and a high number of foreclosures B. Increases in hiring, employment, and public confidence, and lots of buyers in the market C. Properties selling at inflated prices, many buyers in the market, and lots of new construction D. Unemployment increasing, prices falling, and foreclosures on the rise

C (Properties selling for more than their appraised value, many buyers in the market, and lots of new construction)

Which of the following best describes the state of the market during the over supply phase of the real estate cycle? A. High but stabilized unemployment and a high number of foreclosures B. Increases in hiring, employment, public confidence, and lots of buyers in the market C. Properties selling for more than their appraised value, many buyers in the market, and lots of new construction D. Unemployment increasing, prices falling, and foreclosures on the rise

D (Twelve district banks comprise the Fed)

Which of the following statements is true about the Federal Reserve? A. All banks must belong to the Federal Reserve. B. It is a governmental agency. C. Members of the Board of Governors serve 12-year terms. D. Twelve district banks comprise the Fed.

C (Home Affordable Modification Program (HAMP))

Which of the following was created as part of the Homeowner Affordability and Stability Plan? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Consumer Financial Protection Bureau C. Home Affordable Modification Program (HAMP) D. Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

C (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 statement most accurately describes the right of rescission? A. It's another term for squatting, in which a consumer unlawfully occupies a residence. B. It's the right of a consumer to take ownership of a property through the foreclosure process. C. 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 D. The two-business-day period after a loan closes, during which the borrower can cancel the loan.

C (Low interest rates and high property values)

In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market? A. High interest rates and high property values B. High interest rates and low property values C. Low interest rates and high property values D. Low interest rates and low property values

Recession

In what phase of the real estate cycle do foreclosures rise and home prices fall? Expansion Over-supply Recession Recovery

A (American Recovery and Reinvestment Act of 2009 (ARRA))

Which act, which was the first act passed to address the subprime mortgage crisis and was also known as "the stimulus package," sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending? A. American Recovery and Reinvestment Act of 2009 (ARRA) B. Home Affordable Modification Program (HAMP) C. Home Affordable Refinance Program (HARP) D. Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)

Recovery

In which phase of the real estate market cycle would you expect to see properties sit vacant and prices drop? Expansion Oversupply Recession Recovery

Recovery

In which phase of the real estate market cycle would you expect to see property under valued and a large supply of homes on the market? Expansion Oversupply Recession Recovery

Expansion

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

Prime rate

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? Adjustable rate Discount rate Federal funds rate Prime rate

D (It provides additional cash flow for new loans)

What is the impact to lenders when mortgage packages are sold? A. It builds equity in the secondary market. B. It gives the lender credit with secondary markets. C. It limits available funds to offer borrowers. D. It provides additional cash flow for new loans.

Recession

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

C (The economy may grow due to an increased money supply)

What is the most likely effect when the Fed buys securities on the open market? A. Banks will have less money to lend. B. Interest rates will increase. C. The economy may grow due to an increased money supply. D. The economy may slow down due to a smaller money supply.

D (Unemployment increasing, prices falling, and foreclosures on the rise)

Which of the following best describes the state of the market during the recession phase of the real estate cycle? A. High but stabilized unemployment and a high number of foreclosures B. Increases in hiring, employment, and public confidence, and lots of buyers in the market C. Properties selling for more than they're worth, many buyers in the market, and lots of new construction D. Unemployment increasing, prices falling, and foreclosures on the rise

Annual percentage rate

A standardized measure for interest rates and other costs of the loan is called _______. Annual percentage rate Discount points Federal funds rate Prime information

Recovery

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

Increase

Historically, what do property values tend to do over long periods of time? Decrease Historically, property values have not followed a consistent pattern. Increase Remain the same

Over supply

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

A (High but stabilized unemployment and a high number of foreclosures)

Which of the following best describes the state of the market during the recovery phase of the real estate cycle? A. High but stabilized unemployment and a high number of foreclosures B. Increases in hiring, employment, and public confidence, and lots of buyers in the market C. Properties selling for more than they're worth, many buyers in the market, and lots of new construction D. Unemployment increasing, prices falling, and foreclosures on the rise

B (The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral)

Which of the following describes the discount rate? A. The rate at which a bank can obtain a loan from another bank B. The rate at which a bank can obtain a loan from its Federal Reserve bank when using commercial paper as collateral C. The rate at which a bank or lender may loan money to its most creditworthy borrowers D. The rate at which borrowers can refinance their mortgages

A (Banking, bond, and investment analysts)

Which of the following sources can provide real estate professionals with important market data? A. Banking, bond, and investment analysts B. Freddie Kruger C. History books D. Wikipedia

D (Consumers are withdrawing more money from banks than they are depositing)

Which of the following statements best describes disintermediation? A. A bank sells an existing mortgage on the open market. B. An investor loans money to a consumer for real estate financing. C. Consumers are depositing more money into banks than they are withdrawing. D. Consumers are withdrawing more money from banks than they are depositing.

D (They sell packaged loans to investors)

Which of the following statements is true about national lending intuitions? A. Mortgage-backed securities are offered by credit unions. B. They control the flow of the local money supply. C. They fund loans to borrowers. D. They sell packaged loans to investors.